Macro

Morgan Stanley thinks global economy accelerating.

You wouldn’t know it given the noise fromChina and Greece, but the world economy is picking up steam.

Morgan Stanley predicted on Thursday global expansion of almost 4 percent in the second half of this year, up from 2.9 percent in the first six months.

The firm says monetary stimulus is taking hold and will even be extended by 18 central banks this year, enough reason for optimism despite it also forecasting a protracted slowdown in China and 75 percent risk of Greece leaving the euro.

“The strength of domestic demand in developed economies will be the key engine of growth,” Chetan Ahya and Elgan Bartsch, Morgan Stanley’s co-chief economists, told clients.

“We expect the global economy to continue on the path of gradual recovery.”

Attached Files

France's Fabius says "difficult issues" remain in Iran nuclear talks

France's foreign minister said on Thursday major powers and Iran would continue negotiating overnight to try to resolve the "difficult issues" that remained in nuclear talks.

"There are difficult points that remain, but things are all the same going in the right direction," Laurent Fabius told reporters. "Due to these conditions, I have decided to stay and work tonight and tomorrow morning. I hope we will be able to complete the metres that need to be run."

"There are good things, but there are difficult things that still need to be worked on."

BRICS vow to coordinate actions to protect their economies

The BRICS emerging nations said on Thursday they were worried about the volatility of global financial markets and oil prices and agreed to coordinate efforts to keep their economies stable.

Leaders of Brazil, Russia, India, China and South Africa finally launched the group's largest initiatives to date -- a development bank and a currency pool -- and called at a summit for a swift deal on curbing Iran's nuclear programme.

For Russian President Vladimir Putin, hosting the summit in the city of Ufa, the launch of the bank and the pool had been a key priority, as was the group's ability to sound more unified than at some previous meetings.

"We are concerned about the instability of the markets, the high volatility of energy and commodity prices, and the accumulation of sovereign debt by a number of countries," Putin said.

"These imbalances affect the growth rate and our economies. In these circumstances, the BRICS states intend to actively use their own resources and internal resources for development," he added, without giving details.

Frantic efforts by Beijing to stem a stock market rout helped Chinese shares bounce back on Thursday after tumbling for more than a week, but the costs of the heavy-handed state intervention are likely to weigh on the market for a long time.

Chinese President Xi Jinping refrained from comments about the slump, saying only that there are "difficulties" in the global economy, but urged the BRICS to increase coordination.

"Let's go hand-in-hand to build a great BRICS partnership," he told the group.

The BRICS account for a fifth of the world's economic output and 40 percent of its population.

Greek energy minister unveils plan for €2bn gas deal with Russia - FT

Greece has mapped out details of a planned landmark €2bn gas project with Russia in a move that could stir tensions with Brussels just as Athens is seeking a third bailout.

Panayotis Lafazanis, the firebrand leftist energy minister, presented preliminary plans for the project to Greek energy executives in Athens on Thursday in a defiant speech, vowing the government would not be pushed around by EU institutions.

EU policy makers are concerned that Russia could take advantage of the crisis to pull Greece deeper into its orbit, and pipeline politics is critical to relations between the two nations.

Athens and Moscow say the new project, the so-called South European Pipeline, will bring 47bn cubic metres annually of Gazprom’s gas into Europe after 2018. Mr Lafazanis — the political patron of Greece’s biggest public sector company, the Public Power Corporation, which holds a near-monopoly of its electricity market — pledged it would create 20,000 much-needed jobs in Greece.

The promised deal with Russia is a sharp rebuke to Brussels, which wants to reduce EU dependence on Gazprom and argues that southeastern Europe should diversify its supply by prioritising gas from Azerbaijan.

Opening his remarks with pugnacious references to the eurozone crisis, Mr Lafazanis said Greece was aiming to secure a deal with Brussels as quickly as possible. But he warned EU institutions that Athens was not about to roll over.

Value vs growth

NYSE INDEX APPEARS TO HAVE COMPLETED A WAVE THREE... They say when you start to feel seasick you should focus on the horizon. Daily market swings are starting to make me feel seasick. So in line with that nautical theme, I'm going to focus on the market's long-term horizon by using Elliott Waves to try to put things into perspective. I'll explain what that is as I go along. Chart 1 plots weekly bars for the NYSE Composite Index since the 2009 bottom. It looks to me like the six-year rally has completed three major upwaves. Hence the three blue numerals. Elliott Wave Analysis holds that a bull market is comprised of five major waves -- three up waves (1,3,5) interrupted by two corrective waves (2 and 4). It seems clear that the first major upwave ended in 2011. Hence the number 1. A nearly 20% correction that year certainly qualified as a wave 2 correction. The market rallied for four years since late 2011 with only minor corrections. I believe that four-year rally has traced out a five-wave pattern of its own. If I'm right about that, the market has completed its three wave and is due for a wave four correction. Let's take a closer look.

The Greek Key: A cipher for the worlds ills.

ATHENS — In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools.

So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

Such evasion has played a significant role in Greece’s debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before.

MGL: These folks voted yes in the vote.

Why have women played such a crucial role in the crisis? To put it simply, they voted overwhelmingly to reject the bail-out package suggested for their country. Almost two in three women – or 62.3 per cent – voted “No in the referendum, a figure higher than their male counterparts.

This is intriguing.

I had assumed that women would be less likely than men to vote No (which serves as a reminder to never assume anything before checking the facts). As a generalisation, women tend to lean towards the status quo in referendums, and to be less risk averse than men.

MGL: Women voted 'no', apparently because they are largely unemployed, and have nothing to lose from a Greek exit.

Greek premier Alexis Tsipras never expected to win Sunday's referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

He called the snap vote with the expectation - and intention - of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 "ultimatum" and suffer the opprobrium.

This ultimatum came as a shock to the Greek cabinet. They thought they were on the cusp of a deal, bad though it was. Mr Tsipras had already made the decision to acquiesce to austerity demands, recognizing that Syriza had failed to bring about a debtors' cartel of southern EMU states and had seriously misjudged the mood across the eurozone.

Instead they were confronted with a text from the creditors that upped the ante, demanding a rise in VAT on tourist hotels from 7pc (de facto) to 23pc at a single stroke.

MGL: Tsipras was playing poker with the vote, and received a shock.

What was breathtaking, however, was how in a matter of hours the entire dynamic in the Greek crisis seemed to shift, from apocalyptic warnings of a Zimbabwe in the Balkans, to a fresh optimism that the basics of a deal could be worked out.

Many in Brazil contemplate a Rousseff exit

The predecessor and mentor to Brazil's president says she is running on empty.

The chief opposition party says it is ready to take over and the leader of the lower house of Congress says Brazil should reconsider the role and power of the presidency. This is not the usual jockeying of Brazil's noisy, multiparty democracy.

Rather, the economic and political crisis now engulfing Latin America's biggest economy is prompting politicians, economists and ordinary Brazilians to consider what once seemed unthinkable: that President Dilma Rousseff, re-elected less than nine months ago, might not finish her second term, which runs to 2018.

"It's a real possibility," says Carlos Melo, a political scientist at Insper, a São Paulo business school. "Bad policies and political stagnation have grown into something more urgent." No one expects Rousseff, a 68-year-old former bureaucrat turned energy minister, to step down tomorrow.

She has repeatedly said she will not resign. Impeachment would require proof, none of which exists so far, that she committed crimes or other wrongdoing, particularly with regards to a bribery scandal involving state-run energy company Petroleo Brasileiro SA, or Petrobras.

But the mere notion of political instability illustrates how far Brazil has fallen from its zenith just five years ago. Back then, as Rousseff rode the coattails of her predecessor into office, Brazil was aloft a commodities boom and considered a star among developing nations, posting annual economic growth of 7.5 percent even as the developed world staggered.

Now, Brazil's economy is likely in recession, unemployment is climbing and inflation is galloping at nearly 9 percent, or double the official target rate, eroding purchasing power for the working-class most buoyed by the boom.

Meanwhile, the Petrobras scandal edges uncomfortably close to top aides, a federal auditor may soon reject the government's 2014 bookkeeping and her approval ratings have plummeted to single digits, lower than any president in a quarter century.

On Tuesday, the Eurasia Group, a consultancy, raised the probability of Rousseff leaving office early from 20 percent to 30 percent.

"There is political risk beyond what anyone expected," said Neil Shearing, senior economist at Capital Economics in London. "It's not good for anyone trying to make investments or plans."

Still, even members of her ruling Workers' Party are rebelling. The leftist party opposes her ongoing efforts to impose austerity measures, seen by most economists as essential after a prior term of bloated budgets and interventionist policies. Some party legislators have even voted to increase spending.

Former President Luiz Inácio Lula da Silva, the party's biggest star and a possible candidate in 2018, has increasingly distanced himself from Rousseff, whom he plucked from obscurity and named the party standard bearer when he faced a constitutional term limit. Recently, he compared Rousseff's standing to near-empty reservoirs of drought-plagued São Paulo.

In February, the lower house elected Eduardo Cunha, an Evangelical Congressman, to head the chamber, with twice as many votes as those cast for Rousseff's candidate. Although Cunha's party in theory is allied with Rousseff, he has slowed her legislative agenda and recently said she was so weak that Brazil should switch to a parliamentary system.

Few are as emboldened as the centrist Social Democracy party, which last weekend re-elected as its leader Aécio Neves, the senator Rousseff defeated last October. The administration, Neves told reporters, was headed toward an "an interruption."

OECD Indicators Point to Growth Slowdown in Major Economies

The economies of the U.S., China, U.K., Canada and Brazil are seen slowing

Growth is set to slow across more of the world’s largest economies, including the U.S. and China, according to leading indicators released Wednesday by the Organization for Economic Cooperation and Development.

The Paris-based research body said its gauges of future economic activity—which are based on information available for May—also point to slowdowns in the U.K., Canada and Brazil. The indicators had previously pointed to steady growth for the U.K.

If it materializes, the broadening slowdown suggested by the leading indicators would spell another disappointing year for the global economy, which has struggled to recover from the effects of the 2008 financial crisis.

It would also pose a challenge for central bankers, who have already provided large amounts of stimulus in an effort to keep the recovery on track, and would prefer to return interest rates to more normal rates sooner rather than later. Most policy makers acknowledge that the longer interest rates remain very low, the higher the risk of another crisis in the financial system.

The U.S. economy contracted during the first three months of the year, but most economists attribute that weakness to temporary factors, including harsh weather and a labour dispute at West Coast ports, while the stronger dollar appears to have damped exports.

However, the OECD’s gauge of future activity suggests that following a return to expansion in the second quarter, the U.S. economy is unlikely to grow as rapidly as it did last year. The leading indicator for the U.S. has fallen in each month this year, and now stands at 99.5. A level below 100.0, where it started the year, signals a slowdown, while a level above signals an acceleration.

The world’s second-largest economy is also on course for a continued slowdown, according to the leading indicator for China, which fell to 97.3 in May from 97.5 in April.

The OECD’s leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity, and are based on a wide variety of data series that have a history of anticipating swings in future economic activity.

The leading indicators suggest that while economies that have grown more rapidly than their peers in recent years—such as the U.S. and China—are set to slow, those that have lagged are beginning to pick up, including France and Italy.

“Composite leading indicators…point to growth convergence across most major economies and within the OECD,” the research body said.

Indeed, after having been a drag on global growth in the years since the eruption of its debt crisis in 2010, the eurozone is one of the few potential bright spots, as its leading indicator remained steady at 100.7 for the third straight month, signalling that growth is “firming.” However, the indicator doesn't capture the disruption that would result if Greece were to leave the eurozone, a development that seems increasingly possible.

The leading indicators suggest that Russia’s economy may be close to bottoming out, after a long slowdown deepened by falling oil prices and Western sanctions. The leading indicators pointed to steady growth for Japan, Germany and India.

The OECD’s composite leading indicator for its 34 members fell to 100.0 in May from 100.1 in April.

New South Wales Planning Minister Rob Stokes said in a statement on Tuesday that he wanted to alter the mining approval policy in the country's biggest state to reflect "careful deliberation of environmental, economic and social issues", shifting away from prioritising the extraction of resources.

The proposed change could affect Rio's planned expansion of its Mount Thorley Warkworth coal mine about 120 miles north of Sydney, which is awaiting final clearance after an approval process that has taken several years.

The NSW Minerals Council said in a statement that the government had chosen "what it believes is the easy political option rather than the sound policy option".

Alan Leslie, spokesperson for the Bulga Milbrodale Progress Association, a resident group that has opposed the mine expansion, said he hoped the proposed changes would enable the state to "reject Rio Tinto's latest tilt at getting its project through".

New South Wales is already typically viewed as the toughest state to get mining approvals, as it outsources the process to an independent commission.

The country's No. 2 energy retailer AGL Energy Ltd on Monday said it was pulling out of three coal-seam gas projects in the state due to environmental hurdles.

Oil and Gas

Global oil demand to slow in 2016: IEA

Global oil demand will slow in 2016, the International Energy Agency (IEA) said in its latest monthly report, as it warned that the rebalancing of supply and demand in oil markets "has yet to run its course."

Crude oil prices fell to their lowest point in nearly three months in early July, pressured by "ever rising supply" and not helped by the financial turmoil in Greece and China which has unsettled world markets, the IEA said Friday.

Global oil prices fell around 60 percent earlier this year, from around $114 a barrel last June, on the back of a glut in supply and lack of demand amid an uncertain global growth outlook. On Friday, benchmark Brent crude was trading at $59.44 a battle and U.S. light crude was around $53.62.

On the back of this volatility, the IEA forecast that global oil demand growth would slow to 1.2 million barrels a day (mb/d) in 2016, from around 1.4 mb/d this year.

"The rebalancing that began when oil markets set off on an initial 60 percent price drop a year ago has yet to run its course," it said. "Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year."

There were hopes in May and June that prices were on the path to recovery, as supply was taken out of the market. Numerous rigs were closed in the U.S., where production costs are higher than in the Middle East.

However, the IEA said that growth in demand appeared to have peaked in the first quarter of 2015, at 1.8 mb/d and, "will continue to ease throughout the rest of this year and into next as temporary support fades."

The IEA noted, however, that two "curveballs" were contained within its demand forecast: Greece's ongoing financial crisis, to the downside, and Iran – and a potential nuclear deal that could see sanctions on the country lifted -- to the upside.

"A possible Greek exit from European Monetary Union (euro zone) could dampen not only Greek oil product demand, but also potentially curb deliveries across the continent if macro-economic activity were to weaken," the IEA said.

"The upside Iranian risk surrounds the possible removal of sanctions and the additional economic growth and oil product demand that could follow."

Oil prices have not been helped by the decision of the Organization of Petroleum-Exporting Countries (OPEC) not to cut their production ceiling of 30 million barrels a day -- despite the slump in prices and demand.

Indeed, the IEA said that although global oil demand has not picked up, global supply has actually increased. OPEC crude supply, for instance, rose in June to 31.7 mb/d -- a three-year high led by record output from Iraq, Saudi Arabia and the United Arab Emirates (UAE).

This decision not to cut production by OPEC, led by Saudi Arabia, has been widely seen as a strategy to defend OPEC's market share and put pressure on rival U.S. shale oil producers.

And the IEA said this strategy could be working, with "non-OPEC supply growth expected to grind to a halt in 2016, as lower oil prices and spending cuts take a toll."

Attached Files

Shell needs US$80 per barrel oil price to restart oilsands projects

Royal Dutch Shell Plc. may consider restarting mothballed oilsands projects, but not until oil prices return to US$80 per barrel, according to the company’s top executive in North America.

“It probably needs to be in the US$80 range to be interesting, but it all depends on what it costs,” Marvin Odum, Shell’s director of the upstream Americas said in an interview Thursday. “It is a two–piece variable equation.”

Like most major players in the oilsands, Shell has seen its costs come down “considerably,” easing the pain of oil prices that have tumbled 40 per cent in the past 12 months.

The near-term outlook looks unforgiving. Iran may be joining the fray on the supply side. Economic chaos in Greece and stock market convulsions in China are leaning on demand. It’s not clear whether we should turn to Plato or Confucius for wisdom.Read on

But the European major has also shelved a couple of oilsands projects — the 80,000-barrels per day Carmon Creek development and the 200,000-bpd Pierre River project — due to unfavourable economics. The company has also yet to sanction a 100,000-bpd Jackpine expansion which has secured regulatory approval.

“There is no particular driver to make that expansion happen right now as we look at other parts of the portfolio,” Odum said, noting that the company’s oilsands expansion “is further back on the burner in terms of where we are investing now.”

Shell has to navigate the oil downturn at a time when it’s in the midst of a massive US$70-billion takeover of BG Group Plc., expected to be completed in early 2016. The merger could lead to a scuttling of one liquefied natural gas project in British Columbia, as both companies have proposed projects on the West Coast.

Petrobras Said to Draw Interest From Mitsui for Gaspetro

Suitors including Mitsui & Co. and Marubeni Corp. are preparing to submit bids as early as next week for a stake in a gas pipeline unit that Brazil’s state-run oil firm is selling as part of a wider divestment plan, said two people with knowledge of the sale.

Companies from China and Spain are also preparing to deliver proposals to Petrobras for 49 percent of Gaspetro by July 17, several people said, asking not to be identified discussing a private process. Mitsui, Japan’s second-biggest trading house, has been expanding in Brazil since it bought a group of distributors from Enron in 2005.

Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is formally known, joins major oil companies including Chevron Corp. and ENI Spa who are selling assets amid a rout in oil prices to raise cash and reduce operating costs. Petrobras plans to divest $15.1 billion in assets by the end of next year to meet investment goals and start addressing the oil industry’s biggest debt load.

“No decision has been made at present,” Mitsui spokesman Shuhei Iwanaga said. Marubeni has also not made any decision on the asset at this point, a company spokeswoman said, declining to be named in line with corporate policy. A Petrobras press official declined to comment.

Gaspetro has more than 7,000 kilometers (4,300 miles) of gas pipelines in Brazil that supply residential and industrial users, according to Petrobras’s website. Petrobras is cutting spending at peripheral businesses to focus on its most promising oil fields in deep waters of the South Atlantic.

Mitsui is considered a natural buyer because it has worked with Petrobras in the past and is used to owning non-controlling stakes, according to one of the people familiar with the situation.

Other companies that received invitations to participate include Gas Natural Fenosa and Engie, the utility formerly known as GDF Suez SA, another person said. Neither company responded to e-mails seeking comment.

Canadian crude oil due back online

Saipem Loses $2.2 Billion Gazprom Deal for Black Sea Link

Saipem SpA, Italy’s biggest oil-services contractor, lost a $2.2 billion contract to lay a Russian natural-gas pipeline under the Black Sea after its fleet waited seven months for the work to start.

Russia’s OAO Gazprom canceled the deal because it couldn’t agree with Saipem on terms, Sergei Kupriyanov, a spokesman for the Moscow-based company, said Thursday by phone.

Saipem had expected to start work on the project, called Turkish Stream, in June. The contract had been transferred from the scrapped South Stream pipeline, which was abandoned at the end of last year as Russia’s relations with the European Union soured over the conflict in Ukraine.

Saipem, controlled by Italian oil producer Eni SpA, confirmed the cancellation in a statement on Thursday, citing a contractual clause of “termination for convenience.”

The shares slumped as much as 6.6 percent to 8.19 euros in Milan trading, the lowest intraday price in five months. The stock was at 8.32 euros as of 11:23 a.m. local time, extending its decline this year to 5.1 percent.

The cancellation comes only a week after Russia approved access for Saipem’s ships to lay pipes in the Black Sea. The government is keen to press ahead with the Turkish Stream project, which it sees as an alternative to South Stream and would run to Turkey instead of through Bulgaria, bypassing Ukraine. Nevertheless, people with knowledge of the matter said talks between Russia and Turkey have stalled.

Gazprom plans to start talks with potential new contractors for the work soon, it said in a statement on Wednesday. Kupriyanov declined to comment on when construction could begin.

The Russian company has already been paying Saipem to provide two pipe-laying ships, people with knowledge of the matter said in March. Gazprom declined to comment on the costs. Kommersant newspaper reported that Saipem was getting about 25 million euros ($27.6 million) a month as its vessels stood idle.

The Turkish Stream contract would have added about 85 million euros to the company’s earnings before interest, taxes and other items in 2015 and 150 million euros next year, Sanford C. Bernstein & Co. forecast in May.

Attached Files

Sanchez Production Partners Initiates Capital Restructuring with a 1-for-10

Sanchez Production Partners LP today announced that it intends to implement a 1-for-10 reverse split on its common units, effective after the market closes on August 3, 2015.

“Since the summer of 2013, we have worked diligently to better position SPP for future growth by initiating a business development relationship with a committed sponsor, executing management service and related agreements, transitioning employees to Sanchez Oil & Gas Corporation, converting SPP to a limited partnership, and executing our first transaction with Sanchez Energy Corporation,” said Gerald F. Willinger, Interim Chief Executive Officer of the general partner of SPP. “With a solid foundation for SPP built, we are now ready to implement the next set of measures necessary for growth. As we look to expand the Partnership’s asset base by pursuing a larger-scale transaction with a view toward resuming distributions in 2015, we are focused on increased visibility and the deliberate expansion of our unitholder base by attracting institutional investors. The reverse split is supportive of these goals, and represents an important component of our overall strategic plan.”

Pursuant to the reverse split, common unitholders will receive one common unit for every ten common units they own at the close of trading on August 3, 2015. All fractional units created by the reverse split will be rounded to the nearest whole unit. If the fraction created is less than one-half, it will be rounded down to the nearest whole unit. If the fraction is one-half or more, it will be rounded up to the nearest whole unit. Each unitholder will get at least one unit.

Gulf Keystone gets payments for Shaikan crude; cuts output forecast

Gulf Keystone Petroleum Ltd said it had received further payments on recent contracts, helping prop up its cash position, and continued to progress towards a regular payment cycle for the oil it produces.

Shares in the company rose as much as 8 percent to 35 pence on Thursday morning on the London Stock Exchange.

Gulf Keystone has not just been hurt by the steep fall in crude oil prices but also faced the brunt of political tensions in the Iraqi Kurdistan region, where its primary operations are.

The company suspended production and trucked exports from its Shaikan oilfield in Iraqi Kurdistan in mid-February over outstanding payments from the Kurdistan Regional Government for its crude oil.

Gulf Keystone is among a handful of oil producers in Iraqi Kurdistan who started selling their oil to domestic buyers after struggling with months of unpaid export bills.

Gulf Keystone held $72.1 million in cash as of July 8, with further payments expected from its domestic contracts and talks with the Kurdistan government.

The company said that it expected to start trucking crude from the oilfield to Fyshkhabour on the Turkish border in the near future where it would be injected into the export pipeline to Ceyhan, the transportation hub for Middle Eastern, Central Asian and Russian oil and natural gas.

The company expects to secure higher prices once its oil makes it into the pipeline as the crude would then be sold as part of internationally traded blend.

Production rates are now expected at 36,000-40,000 barrels of oil per day (bopd) for the rest of the year, below the 40,000 bopd the company had forecast.

Gulf Keystone said its daily average production is expected to fall to 30,000 to 34,000 bopd for the year, hurt by a five-week suspension of operations at Shaikan in the first quarter, down from 36,000 expected earlier.

Rosneft strengthens Asian foothold to counter sanctions

Top Russian oil producer Rosneft has raised the stakes in its battle with Saudi Arabia for market share by securing new Asian markets to hedge against the risk that any new Western sanctions could hit crude sales.

Rosneft said on Wednesday it had signed a preliminary deal to buy a 49 percent stake in Essar Oil, which controls the Vadinar oil refinery, India's third largest.

Rosneft also signed a deal to supply the refinery with 200,000 barrels per day for the next 10 years.

The deal is consistent with Rosneft's goal to send 40 percent of its oil exports to Asian markets by 2019, up from about a third now, following a chill in relations with the West over Moscow's role in the Ukraine conflict.

"India and China are the two most interesting markets both for crude oil and oil products. Those are colossal markets in terms of population," said Sergei Pigarev, analyst with Rye, Man & Gor securities.

"The deal will, of course, allow Rosneft to cement its position there and help to get more market share from Saudi Arabia, though we have to look at the prices, how much is Rosneft is paying?"

Saudi Arabia fell behind Russia and Angola as the biggest crude suppliers to China in May. The OPEC kingpin also lost its spot as India's top oil supplier to Nigeria for the first time in at least four years.

While Rosneft sends the bulk of its oil to nine large refineries in Russia, it has interests in German and Italian refineries and is looking to get a slice of the market in China.

"The rationale for the deal appears to be finding a new long-term market for Rosneft's crude outside of the EU to minimise the risk of disruptions," analysts at Russian bank Uralsib Capital wrote in a note.

U.S. gasoline demand roars back to life

Consumption of gasoline in the United States is surging according to estimates prepared by the Energy Information Administration.

More than 9.5 million barrels per day (bpd) of gasoline were supplied to domestic customers over the last four weeks.

Consumption is running about 480,000 bpd above the 2014 level and 250,000 bpd above the 10-year seasonal average (link.reuters.com/wuh25w).

The amount supplied to domestic customers has to be estimated from refinery production, imports, exports and stockpiles so it is subject to some estimating errors but the data all paint a consistent picture of strong demand.

Refineries are running flat out to meet fuel demand from motorists. U.S. refineries have been processing a near-record 16.5 million bpd of crude in recent weeks,1 million bpd higher than the seasonal average (link.reuters.com/zuh25w).

Gasoline production is running at almost 10 million bpd, a level only ever exceeded for a few weeks in 2014 (link.reuters.com/cyh25w).

But gasoline stockpiles have fallen 25 million barrels, 10 percent, since February and are now just 4 million barrels over 2014 levels and 5 million barrels over their long-term average (link.reuters.com/fyh25w).

After almost a decade in which gasoline consumption remained in the doldrums, demand has come back strongly.

Gasoline consumption peaked in summer 2007 at almost 9.7 million bpd. But then soaring fuel prices and the recession took their toll and sent demand as low as 9.2 million bpd in summer 2009.

WTI under USD 60 beyond 2016 suggests market rethinking shale

The almost 10% nosedive in headline oil prices this week has many hallmarks of a shocking but short-lived slump, triggered by a confluence of external events and exacerbated by safety-seeking investors and momentum-chasing traders.

By Tuesday afternoon, the crowded race to the exit was winding down, with prices recovering from three-month lows as traders reassessed the factors they blamed for the worst slide in four months: Greece's debt woes; China's stock market meltdown; talks with Iran over its nuclear program; a stronger dollar; a rise in the number of U.S. oil rigs; a breach of key technical triggers.

Yet a deeper look at the market suggests an important and more lasting rethink may now be afoot: longer-term oil prices, normally less volatile and reactive than immediate delivery, have suffered an almost equally violent collapse, pushing crude prices for 2017 to below USD 60 a barrel for the first time ever.

If US shale drillers, the world's new 'swing' producers, can still turn a profit at below USD 60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year.

Mr Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude, that "If you take the curve at face value, it appears to be saying that U.S. shale can grow, if WTI stays below USD 60 for 3 years. That doesn’t seem very likely."

He said that "One would guess that all those companies that had been holding back from cutting projects and jobs over the past few months are not going to hold on much longer and another shakeout will start. And it probably won’t be long before US rig counts start to dive again."

US oil futures for December 2017 delivery have dropped by as much as USD 5 a barrel, or 8%, in the past two days, an even deeper retreat than last November when OPEC's surprise decision to maintain oil output despite a global glut sent markets into a deepening tailspin.

The more liquid frontline prices for delivery in August this year have fallen only slightly further this week and are still several dollars above their trough from March. Longer-dated futures are plumbing contract lows, testing the break-even economics for US shale oil drillers.

The cause of this unusual tumble is still a topic of debate.

Some link it to a future shift in fundamentals such as the expected boost in Iran's oil exports next year. Others said it may reflect the realization that oil industry costs are falling faster than expected as activity slumps. A few wonder if it is an unusually large producer hedge, or a big macro-economy fund trade unwinding.

Longer-term oil futures are normally insulated from the speculative, short-term fluctuations and factors that afflict immediate prices. Too illiquid to attract fast money, they tend to trade on more strategic themes, whether a long-term bet on prices or a corporation seeking to hedge its price risks.

Front-month oil futures have posted a daily change of more than USD 1 a barrel on 62 occasions this year, trading in a range of over USD 20; December 2017 has moved by that magnitude only 18 times, trading between USD 61 and USD 67 a barrel.

Mr Jan Stuart, Credit Suisse analyst, said that “The fact that this week's activity has affected both ends of the futures curve in nearly equal measure is unusual. This isn’t a simple front-month correlation trade or a dip in demand. This is investors who invest all along the curve picking up the ball and going home. That's what this looks like."

Attached Files

Alfa Oil Dream Falters as $1.7 Billion Pacific Bid Falls Apart

Mexico’s Alfa SAB and partner Harbour Energy Ltd. dropped their plans to buy Pacific Rubiales Energy Corp. after the driller’s largest shareholder spurned a takeover offer once valued at as much as $1.7 billion.

Pacific Rubiales said Wednesday it would have “no further material obligations” to its former suitors after accepting their withdrawal. Alfa said its offer “correctly valued” Bogota-based Pacific Rubiales and had no plans to sweeten the price.

The pullout derails Alfa’s quest to become an oil company and take advantage of Mexico opening its fields to private producers for the first time since 1938. The maker of lunchmeat and car parts slumped 10 percent since being identified as a bidder in May, a sign of investor dismay even as Pacific Rubiales stakeholder O’Hara Administration Co. lambasted the $C6.50-a-share bid as too low.

“We see this as positive for Alfa,” Ana Sepulveda, an analyst at Invex Casa de Bolsa SA, said in a telephone interview in Mexico City. “The requirements from funds that held stakes in Pacific Rubiales were overvaluing the company.”

The original bid for Pacific Rubiales was about C$2.1 billion, or $1.7 billion, when it was made in May. By Wednesday, the value had fallen to $1.6 billion. The company’s shares are listed in Toronto as well as in Bogota.

Alfa’s exit means Pacific Rubiales executives now will have to restart a turnaround effort, according to Nathan Piper, an analyst at RBC Capital Markets. In a note, he estimated that the company is saddled with about $4.5 billion in net debt and will lose 35 percent of current production when the license for its biggest field ends in 2016.

Pacific said in a statement that it would continue with its plans to reduce its debt and operating costs, and to divest non-core assets. It also will continue to pursue “Mexico energy opportunities” with Alfa as a partner.

Pioneer says increasing drilling activity

U.S. shale exploration and production company Pioneer Natural Resources Co on Wednesday said it is increasing drilling activity in Texas following the sale of its Eagle Ford shale pipeline and processing business.

Pioneer, based in Dallas, said it has already added two drilling rigs in the Permian Basin this month and plans to add an average of two per month during the balance of the year as long as the crude oil price "remains constructive," the company said in a news release.

The increase in drilling activity is not expected to have a big impact on 2015 production previously forecast to grow more than 10 percent, but will push capital spending up $350 million to $2.2 billion, the company said.

EIA reports small rise in domestic oil production

Summary of Weekly Petroleum Data for the Week Ending July 3, 2015

U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending July 3, 2015, 65,000 barrels per day more than the previous week’s average. Refineries operated at 94.7% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.9 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

U.S. crude oil imports averaged over 7.3 million barrels per day last week, down by 197,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.2 million barrels per day, 1.6% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 852,000 barrels per day. Distillate fuel imports averaged 164,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.4 million barrels from the previous week. At 465.8 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.2 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 1.6 million barrels last week and are in the middle of the average range for this time of year.

Propane/propylene inventories rose 2.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 10.6 million barrels last week. Total products supplied over the last four-week period averaged 19.9 million barrels per day, up by 4.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, up by 5.3% from the same period last year. Distillate fuel product supplied averaged about 3.9 million barrels per day over the last four weeks, up by 1.5% from the same period last year. Jet fuel product supplied is down 6.5% compared to the same four-week period last year.

Attached Files

UK Chancellor Confirms Tax Relief for O&G Investment

UK Chancellor of the Exchequer George Osborne confirmed Wednesday tax relief measures for the development of oil and gas fields on the UK Continental Shelf that he first announced in March. Osborne also stated in his 'Emergency Budget' – the first Budget from a Conservative government for almost two decades – that the types of investment that will qualify for allowances have been broadened.

In the previous March Budget Osborne announced a new tax allowance to stimulate investment, while the government would also cut both the Petroleum Revenue Tax and the Supplementary Charge – which is paid on ring-fenced oil and gas profits.

In his Budget speech to Parliament Wednesday, Osborne said: "The large reductions in tax on North Sea oil and gas that I announced in March are going ahead and today we broaden the types of investment that qualify for allowances."

This broadening will see the expansion of North Sea investment and cluster area allowances to include additional activities. The definition of investment expenditure will be extended to include what the Treasury called in a Budget document "certain discretionary non-capital spend and long-term leasing of production units". The allowance will exempt a portion of a company's profits from the Supplementary Charge.

Meanwhile, the government also plans to bring forward proposals for a sovereign wealth fund for communities that host shale gas projects.

LNG companies slugged with huge rates increase

Gladstone's LNG companies will be slugged massive increases in the amount of rates they pay the Gladstone Regional Council once their production trains start exporting liquefied natural gas.

Two new rating differential categories have been added to the council's rating list this year especially to cater for the LNG industry.

One rate, 77.490 cents in the dollar of land valuation, will apply to plants operating one production train and the other, 154.980 cents in the dollar, for those with two operational production trains.

All three LNG plants will have two trains when completed.

Currently the QCLNG plant is the only producing facility, while the others are either still in construction or in the commissioning phase.

During the construction phase of the projects, the gas companies have been paying 66.083 cents in the dollar.

Council chief financial officer Mark Holmes said the new rate levels wouldn't apply until the plants were producing and exporting LNG.

The rate increase will be capped so the companies will pay no more than a 50% increase in the previous year's rates, which means it could take some years before the total impact of the rating change will be felt.

Mr Holmes said the changes were an attempt to create a fair and equitable rating system across all ratepayers.

"For example, our residential ratepayers are currently paying what we have estimated to be 1.48% of their income. Our major industries at present are paying about 1.13% and the LNG companies are paying well below that level.

"We want to see fairness across the board. It's a process we started in 2012 and it will take some years before it is finally implemented across all categories.

"We have done our best so far to attempt to achieve that," he said.

Mr Holmes said the council had met with the three LNG companies and explained its position.

"The meeting was a fairly agreeable one, and while the gas companies may not be impressed with what we are trying to achieve, they seemed to understand the reasoning behind it."

New subsidy formula to boost ONGC and OIL India earnings in Q1

Financial Express reported that oil and gas producers ONGC and Oil India are set to report strong numbers during April to June 2015, owing to better realisations from crude oil sales. This is because the government-owned companies would have to fork out meagre funds towards compensating PSU oil-marketing companies post the government’s new subsidy sharing formula. The Indian basket of crude oil averaged at USD 61.47 per barrel in the quarter.

The Narendra Modi government has rolled out a subsidy sharing mechanism according to which upstream players such as ONGC and Oil India would have to bear no subsidy if the average crude oil price during April-June remains below USD 60/barrel. If the price is between USD 60 and USD 100 per barrel, they would have to shell out 85% of the incremental price towards oil subsidy. The sharing would be 90% if crude crosses USD 100 per barrel.

“The total subsidy bill estimated for Q1 FY16 is INR 10,600 crore. Of this, we expect subsidy burden INR 670 crore on ONGC and around INR 50 crore on OIL if the new subsidy sharing formula is followed. The remaining will be compensated by the government. We estimate ONGC’s gross realisation at USD 63 per barrel and for OIL at USD 61.5 per barrel.”

Going by the latest expectation figures, ONGC's oil subsidy bill would drop by 95% to just INR 670 crore during April to June 2015 against INR 13,200 crore in the same months the previous year. The largest oil and gas explorer in the country is expected to post a net profit of over INR 5,670 crore in Q1 of the current fiscal, which would be 18.6% higher compared with INR 4,781.8 crore in the year-ago quarter.

Baker Hughes announces June 2015 rig counts

Baker Hughes Incorporated announced today that the international rig count for June 2015 was 1,146, down 12 from the 1,158 counted in May 2015, and down 198 from the 1,344 counted in June 2014. The international offshore rig count for June 2015 was 277, down 7 from the 284 counted in May 2015, and down 43 from the 320 counted in June 2014.

The average U.S. rig count for June 2015 was 861, down 28 from the 889 counted in May 2015, and down 1,000 from the 1,861 counted in June 2014. The average Canadian rig count for June 2015 was 129, up 49 from the 80 counted in May 2015, and down 111 from the 240 counted in June 2014.

The worldwide rig count for June 2015 was 2,136, up 9 from the 2,127 counted in May 2015, and down 1,309 from the 3,445 counted in June 2014.

PIRA: US LNG exports to mark new era

NYC-based PIRA Energy Group believes that the U.S. as LNG supplier on a large scale is the new era in the global gas industry.

An initial Asian spot deal for $7.20/MMBtu sourced from Australia is actually a harbinger of a new era in global gas: that of the U.S. as LNG supplier on a large scale. It also strongly suggests that some good deals are available in Australia on FOB cargos to keep the trains operating at a higher capacity, PIRA said in its weekly report.

In the United States, the release of the EIA’s April Monthly came with a wealth of new supply data as the agency expanded coverage to include monthly production statistics from 10 additional states. The data were retroactive through the first quarter of 2015.

The third quarter is, by far and away, the lowest period for gas demand during the calendar year in Europe, says PIRA.

While the year-on-year growth in gas demand seen in the first half of the year will continue in the third quarter, the volume of growth in absolute terms will be so small as to be hardly noticeable in the gas balances. The third quarter is often useful for understanding the outlook for underlying gas demand growth, as the role of weather is severely diminished in most cases.

The recent heat wave will offer some support to gas demand, as it has already been seen in France, but the focus is on 3Q as a period when more about underlying gas demand in sectors such as industry is revealed.

The conclusion is that some recovery is occurring in places like Spain and the U.K., but efficiency gains in gas consumption and renewables substitution in emerging lower carbon markets continue to stymie growth in most other places.

Libya lifts force majeure at Ras Lanuf oil terminal

Libya has lifted force majeure at the major Ras Lanuf oil terminal, though restarting exports would take at least two days depending on available crude, a spokesman for the National Oil Corporation said on Tuesday.

Restarting Ras Lanuf would be a major boost for Libya’s crippled oil industry. The terminal, along with another major eastern oil port Es Sider, has been under force majeure since December last year due to fighting between rival factions,

“The NOC lifted the force majeure on Ras Lanuf yesterday. The port will be ready to restart exporting, but this depends on the amount of available oil and the working fields linked to the port,” NOC spokesman Mohamed Harari told Reuters.

Oversupply leads to fall in China's retail fuel prices

China's retail fuel prices will be cut slightly starting from Wednesday, reflecting a glut of supply in the market.

The National Development and Reform Commission, the nation's top economic planner, said that retail prices of gasoline would fall by 95 yuan ($15.35) per metric ton, or 0.07 yuan a liter, while diesel prices will go down by 90 yuan per ton, or 0.08 yuan a liter.

After the reduction, the benchmark price of 90-octane grade gasoline will be 6.09 yuan a liter.

Domestic retail fuel prices have seen five hikes and five cuts so far this year. The gasoline price has increased by 365 yuan per ton while the price of diesel is up by 295 yuan per ton.

Influenced by Greece's rejection of debt bailout terms, the US crude price benchmark West Texas Intermediate fell 7.73 percent, or $4.40, on Monday to $52.53 a barrel, the biggest drop since Feb 4 and the lowest price per barrel since April 13.

Li Yan, a crude oil analyst at consultancy Shandong Longzhong Information Technology Co, said several factors may further drag down the crude price in addition to Greek crisis.

"Crude output from the United States and the Organization of Petroleum Exporting Countries continue to increase, which will pump into an oversupplied global market," he said.

He expects retail prices to falls again at the next adjustment date, scheduled for July 21.

According to the consultancy, average running capacity at China's refineries was 81.72 percent during the first half, a 1.39 point decline compared with the same period last year, reflecting a weak downstream demand.

"The number of China's autos has been increasing, resulting in a stable demand for gasoline, but diesel demand is slowing because of a weak economy, especially in the logistics sector," Li said.

Chevron's Gorgon faces struggle to offload test LNG

Chevron's $54 billion Gorgon LNG project - the world's most expensive - may be forced to dump chunks of its early production onto an already saturated global spot market, as some Japanese clients warn they are unlikely to take up test shipments.

This would be another blow for a project hit by billions of dollars in cost overruns and underscores the difficulties for a raft of Australian liquefied natural gas developments facing subdued demand and competition from U.S. shale gas.

After nearly five years of construction, test exports of LNG from Gorgon's 15.6 million-tonnes-a-year (mtpa) plant off western Australia are due to begin late this year and last until April 2016, when commercial deliveries will likely start.

Japanese buyers holding long-term supply contracts have in the past eagerly sought early cargoes, but some could pass on the test shipments with long-term prices well above spot prices languishing at four-year lows.

"At this point there is no plan," a spokesman at Tokyo Gas said, when asked whether it planned to take the first of the test, or commissioning, cargoes.

The firm has a contract to take 1.1 mtpa from the project.

A senior official from another Japanese client also said it was unlikely to buy these cargoes.

"If there's spot supply that's cheaper than Chevron's offer price, then we'll not take from Chevron," said the official, who declined to be identified.

Chevron will already have to sell some LNG on the spot market after securing 25-year sales deals for under 70 percent of its share of Gorgon LNG, according to company data, less than the 85 percent a project backer would normally seek to guarantee returns.

The U.S. firm, which has a 47.3 percent stake in Gorgon, has also signed a five-year deal with South Korea's SK LNG Trading to supply 0.83 mtpa starting from 2017.

Japanese buyers will take nearly a third of Gorgon's output once commercial sales start, but if test shipments are not taken up then up to 2.4 million tonnes of LNG could hit spot markets leading up to April, Reuters calculations based on company data showed.

While firms with long-term contracts would normally be obliged to take gas during the test phase, an industry source briefed by a buyer said Japanese clients had built in the right to pass when negotiating their contracts.

Aside from Tokyo Gas, other Japanese buyers of Gorgon include Chubu Electric Power and Osaka Gas, which also have small equity stakes in the project, and Kyushu Electric Power and JX Nippon Oil.

Whether or not they take commissioning cargoes will largely depend on how competitively priced they are versus spot.

Chevron tied long-term contract sales of Gorgon supply to oil prices at an estimated 14.85 percent, or "slope", of a barrel of Brent crude, with a small $0.50-$1.00 premium.

That translates into an LNG price of $10.10 per million British thermal units (mmBtu) at current Brent prices, compared with spot LNG currently at $7.20 per mmBtu.

Should oil rise towards year-end, as some analysts expect, the gap between Gorgon LNG supplies and spot prices could be stretched further.

An Osaka Gas spokesman said no arrangements had been made for taking the first of the commissioning cargoes, though it was possible it could take some before the end of March.

Chubu Electric and Kyushu Electric said the timing of the first delivery of gas was undecided, while JX Nippon declined to comment.

Chevron could offer purchasers compensation to encourage them to take test shipments, a source familiar with the industry said.

EIA slightly raises 2015 and 2016 oil production forecasts

The U.S. government on Tuesday modestly raised its 2015 and 2016 U.S. crude oil production forecasts while lowering its price outlook.

In its short term energy outlook, the U.S. Energy Information Administration raised its 2015 U.S. crude oil production growth forecast to 750,000 barrels per day (bpd) from 720,000 bpd.

The EIA forecast 2016 production will fall by 150,000 bpd, slightly less than its previous forecast of a 160,000 bpd decline.

The energy agency also lowered its forecasts for U.S. and global crude oil prices for 2016.

The average 2016 price for West Texas Intermediate crude , the U.S. benchmark, was forecast at $62.04 per barrel, a 5.4 percent drop from the previous monthly EIA forecast. The global benchmark Brent was forecast to average $67.04 per barrel, a 4.9 percent drop from the previous monthly EIA forecast.

In a first, natural gas outpaces coal for US electricity generation

April was a significant month for the U.S. fuel mix. As SNL Energy points out, it marked the first month – ever – that the United States generated more power from natural gas than coal. Driven by low gas prices and a slew of carbon regulations taking coal plants offline, coal's year-over-year April production declined 18.9%, very similar to gas' 20.6% increase.

Nuclear generation saw a 6% boost, while solar thermal and photovoltaic rose more than 57%.

The federal government's Clean Power Plan, which aims to reduce greenhouse gas emissions by 30% by 2030, is predicted to take some 90 GW of coal-fired production offline — more than twice the amount expected by 2040 without the new regulations, according to the EIA. The U.S. Environmental Protection Agency's Mercury and Air Toxics Standards, despite beingremanded by the U.S. Supreme Court last month, has already been responsible for a slew of retirements, and has been estimated to account for about 40 GW of the 90 slated to retire by 2040.

While gas has been the beneficiary of late, rising from 76,728 GWh generated in April of last year, solar energy is seeing the largest percentage gains. The U.S. April solar output rose from 1,633 GWh in 2014 to 2,567 GWh this year.

Total renewable generation, on an annual basis, has risen from about 358,000 GWh in 2005 to 540,000 GWh last year.

Parex Resources provides operational update

Grew Q2 (April 1-June 30, 2015) average oil production to 27,025 barrels of oil per day compared to production guidance of 26,500 bopd and an increase from the prior period production of 26,729 bopd;

Commenced production at the Rumba exploration discovery from the Mirador Formation on June 20, 2015 (Block LLA-26, 100% WI). The Rumba-1 well is producing at an initial restricted rate of approximately 1,000 bopd of 19 API oil with a water cut of less than 1%;

Drilled Rumba-2, an appraisal follow-up to Rumba-1 on June 19, 2015. Rumba-2 was programmed to evaluate the Mirador formation approximately 1 kilometer north-east of Rumba-1. Initial interpretation suggests that the primary objective Mirador formation appears to be connected and higher to Rumba-1. The drilling rig has initiated completion operations on Rumba-2 and we plan to use the current drilling rig to drill at least one additional well on the existing pad;

Abandoned drilling of the exploration Bazar-1 (Block LLA-26, 100% WI) due to mechanical problems in the Leon/C1 formations. Using the same drilling pad as Rumba-1, Bazar-1 targeted the Une Formation with a planned horizontal departure of 2.2 kilometers and a wellbore deviation in excess of 60 degrees. Parex has applied to have Bazar-1 classified as the second and final current phase commitment well on Block LLA-26. The Company has re-designed a new drilling program to target the deeper Une Formation and expects to drill the Bazar-2 exploration well prior to year-end 2015;

Drilled and abandoned the Zorro Rojo (LLA-20, WI 100%) exploration commitment well. Parex has fulfilled all outstanding work program commitments on Block LLA-20;

Capachos production contract has been awarded to Ecopetrol S.A. by the National Hydrocarbon Authority, fulfilling a key condition of Parex' farm-in agreement. Subject to regulatory approval, Parex will have 50% working interest and operatorship on the Capachos Block and will pay 100% of the cost of drilling two development wells. The Company is now initiating community dialogue and civil construction with the first well expected to spud in Q4 2015;

The work program is to begin in Q4 2015 and is expected to define the 2016 drillable prospects. Accelerating the 3D seismic program into 2015 allows Parex to acquire seismic information at approximately a 50% lower cost on a per unit basis than in 2014.

Oil markets slide as Great Unwinding resumes

Oil prices have fallen around $5/bbl, since my suggestion last week that a 'New oil price fall was a matter of 'when', not 'if''. It thus seems increasingly likely they are resuming their fall back towards $30/bbl, as we discussed in last week's pH Report webinar.

Financial players clearly misread the market when they assumed earlier this year that prices would 'inevitably' move higher, and now we will all suffer for their mistake, as markets continue their Great Unwinding.

The funds first began to believe in higher prices after the SuperBowl coup back in January, when prices jumped 20% in 2 days. This pushed prices up in very thin trading. But financial players clearly didn't understand this was just a very clever trading move, and instead decided that it marked the repeat of the Q1 2009 rally. As the chart shows:

Prices then had bottomed below $40/bbl, but moved into recovery as central banks began stimulus effortsFortunes were made as prices moved up to $125/bbl, due to the scale of the liquidity providedAnd clearly many players thought they saw a similar pattern developing in Q1 this yearAs a result, they are storing oil in tanks all over the world, as well as in floating storage

But this is not 2009 all over again. Central banks are most unlikely to add another $35tn of stimulus to that already supplied. Instead, we are seeing the Great Unwinding of all this stimulus, as China heads in a New Normal direction, and the Eurozone countries start to realise Greece's debt will never be repaid.

The fundamentals of supply/demand are, of course, of no interest to the commodity funds. As discussed last week, they currently have $69bn to invest in the futures - and $69bn can buy a lot commodities such as oil at today's lower prices.

The result is that we now have record inventory levels in the US and Europe, plus near-record levels of floating storage. Equally important for Asian markets is that China is probably close to ending its buying to build its strategic oil reserve to cover 100 days of demand.

Obviously prices will bounce around from day-to-day and week-to-week. But barring geo-political upset, it is very hard to see why they should not continue their fall, now they have begun to slide again.

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

Attached Files

Energy Credit Risk Re-Surges As WTI Crude Extends Losses

Overnight hope has faded and WTI crude prices have retumbled as Iran deal expectations rebuild and China economic collapse fears grow. The last few days have seen crude break crucial support levels and tumble to 3 month lows, down over 12% - the biggest losing streak since November. Credit risk for HY energy names is resurgent, crushing the mal-investment dream in a double-whammy for the industry as cost of capital rises and incomes shrink. As Crude re-tumbles...So credit risk surges...

Following recent regulatory pressure to reduce exposure to E&P loans, one wonders who will catch this falling knife.

Attached Files

UAE crude oil exports to fall in Q4 on refining boost -sources

United Arab Emirates (UAE) crude oil exports are expected to fall in the fourth quarter of 2015 as the Gulf OPEC member upgrades its Ruwais refinery and processes more oil to feed rising domestic demand, industry and trading sources said.

The UAE's Ruwais refinery expansion, which more than doubles the plant's capacity from 415,000 barrels per day (bpd), was completed late last year and is expected to hit full capacity before the end of the year, traders say.

The plant will boost the UAE's total refining capacity to more than 1 million bpd, which will help supply the local market and increase the country's oil products exports.

The added refining capacity, however, will eat into crude available for exports, Gulf-based oil and trading sources said.

One source familiar with the matter said the fourth-quarter fall in crude exports from state-run Abu Dhabi National Oil Company could be as much as 200,000-250,000 bpd.

The cuts would not affect the long-term contracts ADNOC has with its clients, but it would limit its short-term deals, the source said. "These (short-term) volumes would go to the local market," the source said.

Some reductions in exports have already been seen since ADNOC began commissioning work at Ruwais, but the diversions to the refinery have been somewhat muted by a late-2014 increase in the output of ADNOC's flagship crude by 200,000 bpd to 1.6 million bpd, according to a buyer of Abu Dhabi crude.

Also, a portion of the refinery's throughput is made up of the ultra light oil known as condensate, which is not included in the UAE's crude output and export figures.

India eyes Canadian crude oil contracts as it looks to diversify supply sources

Indian state-owned oil companies are pursuing opportunities to lift additional cargoes of Canadian crude and also enter into long-term offtake contracts, in line with efforts to reduce their dependence on the Middle East, senior government officials from New Delhi said.

"OPEC is an important club for our crude oil procurement, but simultaneously we would like to diversify our strategy and go by our economic interests and long-term relations," Indian oil minister Dharmendra Pradhan said over the weekend in Calgary, on the sidelines of an energy partnership forum hosted by ONGC Videsh Ltd.

India is expanding its import base by procuring increasing volumes of crude from Latin America and West Africa and would like to include Canada too, he said.

"[State-owned refiner] Indian Oil Corp.'s 300,000 b/d new refinery at Paradip in the East Coast, which is now in the final stages of full commissioning, could process Canadian heavy crude," Pradhan said, noting that previously Indian refineries were limited in the grades of crude they could process.

"Our capability and capacity has now changed and we can process heavy, sour and lighter grades. Compared with our 2013 import of 3 million b/d, we see that figure doubling to 6 million b/d by 2030, based on current forecasts. Our appetite as an energy consumer will grow substantially and we are keen on engaging the Canadians in a bigger way," Pradhan said.

IOC last year bought about 1 million barrels of White Rose light crude produced by Husky Energy from its offshore acreage in Canada's Newfoundland and Labrador.

The two determining factors for lifting additional volumes of Canadian crude would be "economics" and "finding a way to deliver the crude to Indian shores," IOC Chairman B. Ashok said on the sidelines of the event.

Legacy Reserves to Acquire East Texas Nat Gas Assets for $440M

Legacy Reserves announced it has entered into separate agreements with affiliates of Anadarko Petroleum and Western Gas Partners, LP to purchase natural gas properties and gathering and processing assets in East Texas for a combined $440 million. These properties represent Legacy's entry into a new basin in East Texas and into meaningful gathering and processing operations supporting the natural gas properties. The closings of these transactions are expected to occur in the third quarter, and the purchase prices remain subject to customary adjustments. Legacy anticipates funding these transactions with borrowings under its revolver. Highlights of this acquisition are as follows:

Estimated proved reserves of approximately 420 Bcfe of which 100% are natural gas, 95% are classified as proved developed producing, and 95% are operatedEstimated Q3 2015 production of approximately 70 Mmcfe/d, yielding a proved reserves-to-production ratio of 16.4 yearsMulti-year development plan centered on recompletions and workovers to further flatten production declines and extend the productive life of the fieldsSignificant additional drilling inventory in a higher gas price environment567 miles of high-pressure pipeline and low-pressure gathering lines and a 502 Mmcfe/d processing plant with access to 5 major gas marketsExpected NTM cash flow of approximately $60 million

Paul Horne, Legacy's President and Chief Executive Officer, commented on the purchases. "Today we are pleased to announce the signing of two meaningful acquisitions and the ability to use our ample liquidity to position ourselves for success in 2016 and beyond. This acquisition represents a material entry into East Texas, a region we have wanted to enter for several years due to its long-lived, low-decline, low-cost nature and high potential for bolt-on acquisitions. These high-quality assets combined with the upside optionality of recompletions and a contango gas-curve make this a very attractive acquisition for us.

O’Hara May Consider Pacific Rubiales Bid Above $7.11 a Share

Pacific Rubiales Energy Corp.’s largest shareholder said Alfa SAB and Harbour Energy Ltd. must increase their takeover offer to more than C$9 a share ($7.11) before it would consider the bid.

The current C$6.50 offer, which Alfa-Harbour has said is fair and final, undervalues Latin America’s biggest independent oil producer and places too much concern on its debt, said Orlando Alvarado, a spokesman for O’Hara Administration Co., which leads a group that owns almost 20 percent of Pacific Rubiales.

O’Hara is “very confident” that Pacific Rubiales shareholders will vote to block the current offer at a July 28 meeting. The event was initially set for July 7 until Alfa and Harbour requested more time to win over shareholders with the current offer that values the company at $1.7 billion.

“A buck or two isn’t going to make a difference,” Alvarado said in an interview in New York Sunday. “It needs to be above C$9. They will probably raise their offer to C$7.50. It will be a reputational killer.”

While O’Hara wants to retain its stake, on the assumption that the Toronto- and Bogota-listed oil company will be worth more in three years after board and management changes, Alvarado said the Panama City-based group would consider an offer above C$9.

Alfa, a Mexican conglomerate, and Harbour said last month that their joint bid was fair given the difficulties Pacific Rubiales would face surviving as an independent company amid a drop in output. They also highlighted the company’s high debt and the expiration of a contract to operate in its biggest oil field. Pacific Rubiales has $4.5 billion net debt and a market value of $1.3 billion, according to data compiled by Bloomberg.

“Saying ‘sell’ or the company will go bankrupt is unethical,” Alvarado said.

Technip to cut 6,000 jobs as low oil price hits sector

French oil industry engineering and construction group Technip will cut 6,000 jobs and book a 650 million euro ($719 million) restructuring charge as it steps up cost-cutting.

With clients cutting projects due to low oil and gas prices, the company said it targeted cost cuts of 830 million euros ($919.31 million) with 700 million to be delivered in 2016 and the rest in 2017.

"The slowdown in the oil and gas industry is prolonged and harsh," Chief Executive Thierry Pilenko said in a statement.

"Therefore we have decided to accelerate our cost reduction and efficiency measures - which I know will have tough consequences for employees across the Group," he added.

CFO Julian Waldron said on a conference call that the restructuring would focus on its underperforming Onshore/Offshore engineering and construction business.

The company would reduce the division's activities, close offices in unprofitable countries and sell non-essential assets. Its fleet of vessels would also be trimmed back by early next year.

The company cut its profit estimates for the Onshore/Offshore business, which builds oil rigs, refineries and liquefied natural gas (LNG) plants and accounts for more than half its revenue.

It said it now expected adjusted operating profit from the division this year in a range of 210-230 million euros, whereas in April it had expected a result towards the bottom of a range from 250 to 290 million euros.

It said it now expected adjusted operating profit in its subsea division to be around 840 million euros this year whereas previously it had said it expected at the top of a range from 810 to 840 million euros.

The charge would cover all of the costs related to the restructuring, such as severance and asset writedowns, with 80-90 percent to be booked in the second quarter, Waldron said.

Attached Files

Ensco says found no evidence of wrongdoing in Brazil

Offshore oil driller Ensco Plc said in a statement on Monday it has found no evidence of wrongdoing by its employees or other representatives in a regular compliance review of operations in Brazil.

The statement was in response to comments from Brazilian prosecutor Carlos Fernando dos Santos Lima on Thursday alleging that Jorge Zelada, former director of Petrobras' international division, appeared to have received bribes on a rig operated by Pride International, a company acquired by Ensco in 2011.

The sprawling investigation into a price fixing and political kickback scandal in Brazil had turned up evidence of corruption by more than a dozen foreign firms that had contracts with Petrobras, according to Lima.

Ensco said it had recently shared information from its compliance reviews to assist Petroleo Brasileiro SA, as the Brazilian oil major is formally known, with internal audits.

Giant Perla field flows gas off Venezuela

Giant Perla field flows gas off Venezuela

A 50-50 joint venture of Eni SPA and Repsol SA has started production from giant Perla natural gas field in shallow water offshore Venezuela.

Production is to reach 450 MMscfd by yearend in the first of three development phases. In a second phase, production will climb to 800 MMscfd in 2017. A third phase will increase output to 1.2 bscfd in 2020, a rate the partners say is sustainable through the end of their contract in 2036.

Perla, discovered in 2009, holds an estimated 17 tcf of gas in place in Miocene-Oligocene carbonates occurring at about 3,000 m below sea level.

The Cardon IV SA joint venture, named for the Gulf of Venezuela block, has drilled seven wells. It plans to a total of 26 wells, 21 of them producers, in a development scheme involving four light platforms installed 50 km offshore in 60 m of water. The platforms will be linked by a 30-in. pipeline to a central processing facilityonshore at Punto Fijo on the Paraguana Peninsula. Two treatment trains have capacities of 150 MMscfd and 300 MMscfd.

The company, known as Petrobras, could dispose of the 36.1 percent it owns in Braskem if bidders show up, Valor said, without saying how it obtained the information. By exiting Braskem, Petrobras could resolve the problem of selling naphtha to a client in which the company has a significant financial interest, the newspaper added.

According to Valor, other divestitures could include selling exploration units in Africa, which are owned jointly with Grupo BTG Pactual SA's merchant banking unit, and refining and distribution businesses in Argentina.

Braskem, which is the largest Latin American producer of resins, is controlled by engineering conglomerate Odebrecht SA. Petrobras declined to comment on the Valor report.

Petrobras wants to improve corporate governance practices, including revamping the way tax liabilities are accounted, Valor said. As per request of Chief Executive Officer Aldemir Bendine and his team, such liabilities will have to be provisioned against the balance sheet, the newspaper added.

The report comes as Petrobras trimmed capital spending for the next five years by about 41 percent, a move that investors said was an admission that expansion plans imposed on it by more than 12 years of Workers' Party governments were unrealistic. The company is increasingly relying on cost reductions to improve operational performance.

China to return VAT to CBM-fired power generation

China has decided to return partial or total value-added tax (VAT) to power plants fueled by coalbed methane (CBM) or coal mine gas, effective July1, in a bid to promote comprehensive use of resources, according to an official document released on June 26.

Those power plants that use CBM or coal mine gas to produce electricity at a share of above 95% could enjoy a return of 100 % VAT, said the document jointly released by the Ministry of Finance and the State Administration of Taxation.

For power plants generating electricity or heat with coal gangue, coal slime or stone coal, with coal gangue takes over 30%, 50% VAT will be returned, it said.

And also a 100% VAT return policy will be applied to marsh gas power and heat generating plants with over 80% share of biogas in the fuel mix.

If a power plant uses 100% waste heat produced in industrial process as fuel, it also would be returned the full VAT.

'Coup!' - the scream from Brazil's left.

A constellation of Brazilian organizations issued a statement Monday denouncing what they described as the right’s attempts to topple President Dilma Rousseff.

The statement was signed by 28 groups including the MST Landless Movement and the Catholic Church’s Pastoral Land Commission.

It is also signed by 10 lawmakers from Rousseff’s Workers Party, or PT, as well as by dozens of individuals who signed on a personal basis.

The statement accuses certain sectors of the opposition and the press of repeated attempts to create artificial pretexts for a “breakdown of democratic rule of law.”

Some sectors of the opposition demand the opening of an impeachment process to oust Rousseff for her alleged role in the corruption scandal surrounding state oil company Petrobras, for which former directors of the firm and businessmen from the private sector have been arrested, and for which some 50 politicians are being investigated.

Attached Files

Billionaire Founders Said to Be Close to Delisting Essar Oil

Billionaire Founders Said to Be Close to Delisting Essar Oil

Essar Oil Ltd., India’s second-biggest non-state oil refiner, received National Stock Exchange of India Ltd. consent to delist its shares and is awaiting approval from BSE Ltd., people familiar with the matter said.

The company, founded by billionaire brothers Shashikant and Ravikant Ruia, is expecting BSE permission this week, said the people, who asked not to be identified as the matter is private.

Delisting the company would allow the Ruia brothers greater flexibility and less regulatory scrutiny while selling a stake in the refiner. Russia’s OAO Rosneft was reported as a suitor by The Economic Times in March.

“We will make an announcement as and when we have something to share,” Essar Oil Chief Executive Officer Lalit Kumar Gupta said.

The shares rose 18 percent to 174.10 rupees at the close in Mumbai. The stock has surged 63 percent this year.

Essar Oil’s board approved the delisting plan more than a year ago. The proposal was put on hold in November after the Securities and Exchange Board of India, the stock market regulator, asked for a halt.

The Octofrac?

The Octofrac

Mike Vincent, a well-completion engineer who teaches the technique to industry workers, said he’s been overwhelmed by the sudden interest in the class. He even had to abandon plans he had been making to spend a week fly-fishing in the Rocky Mountains over the summer. “I’m booked every week teaching refrack classes out to November,” said Vincent, who runs a Denver-based firm called Insight Consulting. “It’s amazing how much passion there is.”

Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.” When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held in the well. Vincent said it’s common to see oil recovery climb 60 percent or more.

“I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.

Saudi Line in the Sand: Asian markers at $58.

Egypt raises gas price paid to Italy’s Eni and Edison

Egypt has raised the prices it pays Eni and Edison for the natural gas they produce in the country, an official with state-owned gas company EGAS said on Sunday.

The agreements mark the latest move by Egyptian authorities to improve terms for foreign oil and gas businesses in the hope that more competitive pricing will encourage investment in the energy-hungry country.

“The Oil Ministry signed a deal that amended the price for gas with Eni to a maximum $5.88 for every million British thermal unit and a minimum of $4, based on amounts produced. This is up from $2.65,” the EGAS official told Reuters on condition of anonymity.

The official said that another deal had been signed with Edison for a price of $5.88 per million British thermal units, up from $2.65.

The amended prices will apply to gas produced from new discoveries, the official said.

Egypt last month signed a $2 billion exploration deal with Eni.

Oil minister Sherif Ismail said in March that Egypt had agreed to pay BP and RWE Dea more for their Egyptian production.

Progress in Iran talks but difficult issues remain -Kerry

Iran and the United States have made "genuine progress" on a nuclear deal but there are several difficult issues to resolve and Washington is ready to walk away from the talks if need be, U.S. Secretary of State John Kerry said on Sunday.

"We have in fact made genuine progress but ... we are not yet where we need to be on several of the most difficult issues," Kerry told reporters. "If we don't have a deal and there is absolute intransigence and unwillingness to move on the things that are important (for) us, (U.S.) President (Barack) Obama has always said we're prepared to walk away."

Attached Files

Indonesian oil and natural gas firm Pertamina intends to invest $25bn to upgrade four main oil refineries in the country.

The upgrades are being planned to provide for the rising crude oil demands and are located in Cilacap, Central Java; Balikpapan, East Kalimantan; Balongan, West Java; and Dumai, Riau, reports Jakarta Post citing Tempo.co.

Pertamina processing director Rachmad Hardadi was cited by the Indonesian news portal as saying that the developments will continue till 2021.

Pertamina will co-ordinate with strategic partners for the upgrade initiatives without giving up its majority stake.

Japan based JX Nippon Oil and Energy and Saudi Arabian oil giant Saudi Aramco had earlier expressed interest to participate in the upgrade projects for the refineries, reports The Jakarta Post.

JX Nippon Oil is already a part of the Balikpapan refinery upgrade project which aims to increase its daily production capacity to 360,000 barrels from its present capacity for 260,000 barrels. The firm is likely to sign the potential agreement for the project with Pertamina in November.

State-owned Pertamina operates six refineries in the country along with refineries in Kasim in West Papua and Plaju in South Sumatra.

Indian Tycoon Plans to Invest $2.5 Billion in Brazil Oil and Gas

Videocon Industries Ltd., an Indian maker of consumer electronics with ambitions to become a major energy producer, plans to invest as much as $2.5 billion over three years in Brazilian oilfields, Chairman Venugopal Dhoot said.

The scope for oil from its blocks in the South American country is four times higher than the largest field in India and the company will pursue expanding its energy operations there, the billionaire said in an interview in London.

“It is just the beginning,” said Dhoot, who sold Videocon’s 10 percent stake in a Mozambique natural gas field for $2.5 billion to two state-owned Indian explorers in 2013.

Dhoot, 64, is seeking to reposition Videocon as an oil & gas explorer with stakes in at least eight hydrocarbon blocks in countries including Indonesia and East Timor. It is exploring “more and more,” with mergers and acquisitions being one of the key opportunities, the company said in its annual report last month.

Videocon owns stakes in 10 exploration blocks in Brazil through a joint venture with an upstream unit of Indian refiner Bharat Petroleum Corp. Many of them are operated by state-owned Petroleo Brasileiro SA, which is selling assets to reduce debt that stands at an industry-high of $125 billion.

Petrobras invited a small group of international companies with offshore experience to bid for stakes in some concessions, including pre-salt blocks, people with knowledge of the matter said last month.

Pacific Rubiales Holders Delay Vote on Eve of Proxy Deadline

Pacific Rubiales Energy Corp. delayed a shareholder vote on its proposed takeover at the request of the would-be buyers just prior to the proxy vote deadline.

Mexico’s Alfa SAB and Harbour Energy Ltd. asked for the meeting to be pushed back to July 28 from July 7, Pacific Rubiales said in a statement. The delay is meant to give Pacific shareholders more time to consider the offer, Alfa said in an e-mailed response to questions.

Voters had until Thursday to send in proxy votes opposing the deal to an investor group led by O’Hara Administration Co., and until Friday to deliver proxies in favor of the offer. The new proxy deadline is July 24.

The O’Hara group holds almost 20 percent and is opposing the C$6.50-per-share offer on the grounds it undervalues Latin America’s biggest non-state-owned oil producer.

In an interview Wednesday, Alfa Chief Financial Officer Ramon Leal said the outcome of the vote was “very uncertain.”

Two-thirds of total votes and a simple majority of votes other than Alfa and its affiliates at the meeting are needed for the deal to close, according to a May 21 statement.

O’Hara is threatening to exercise so-called dissent rights, which would breach a condition that holders of not more than 5 percent do so. Pacific Rubiales says Alfa and Harbour can forgo the dissent-rights condition.

CNOOC's new output to lift China's oil production from 2014 record

China's crude oil output looks set to rise this year from a record in 2014 as new production from third largest producer CNOOC helps to counter reductions from its two bigger rivals.

Output growth from China would add to a global glut even as exporters such as the Organization of the Petroleum Exporting Countries (OPEC) and Russia produce at near record highs and U.S. shale producers keep ramping up output.

While there is no official Chinese production outlook, information from the biggest state oil companies indicates the nation's output will rise slightly in 2015, largely due to increased production from CNOOC Ltd, the listed unit of state-owned China National Offshore Oil Corporation.

"What we have spent in the last few years has laid the foundation for the production growth this year," said an employee with CNOOC's investor relations department who asked to remain unnamed. CNOOC spent 107 billion yuan ($17 billion) on capital expenditures in 2014.

Despite recent cost cuts, CNOOC has said it has already added at least 40,000 bpd of crude output this year. And it aims to increase daily domestic oil and gas output in China by at least 135,000 barrels of oil equivalent by the end of 2015, according the company's 2015 outlook.

China, the world's fourth biggest oil producer, raised its output in the first five months of this year by 1.8 percent from a year ago to 4.25 million bpd, compared with growth of just 0.1 percent over the same period in 2014.

In 2014, China produced an annual record 4.2 million bpd.

Combined output from CNOOC and smaller producers was up 16 percent from a year ago by end-April, according to a biweekly report from the official Xinhua news agency.

China's two largest producers, PetroChina and Sinopec Corp, have both announced cuts.

PetroChina plans to shrink its worldwide output by 1.5-1.6 percent in 2015 - about 40,000 bpd - with more than 70 percent of the cuts to come in China.

Sinopec's output in China is set to fall 30,000 bpd, or about 3.5 percent, to around 820,000 bpd this year, according to its annual report.

Alternative Energy

Statoil Plans To Build World’s First Floating Wind Farm

Statoil, the Norwegian oil and gas giant, is considering taking a major role in wind power. The state-owned energy company said that it will decide in September whether to invest in a floating wind farm off the east coast of Scotland.

The company, based in Stavanger, is already experimenting with alternative energy technology, having experimented with a floating wind turbine off Norway. Now it’s considering a farm made up of five 6-megawatt turbines off Aberdeen in a part of the North Sea where the water is about 100 meters deep.

Wind energy has met some stiff popular resistance, with many people objecting to their marring of rural landscapes. Even offshore turbines that are fixed to foundations have met opposition because they’re restricted to waters of no more than 50 meters deep and thus tend to be near the shore and visible to those on land.

As a result, Statoil is exploring the possibility of using floating turbines farther out to sea to avoid the negative visual impact. “[T]his could be the first floating wind power park in the world,” Statoil spokesman Morten Eek said in Oslo.

If the company decides to build the floating wind farm off Aberdeen, the project would include turbines manufactured by the German company Siemens. Its turbines would include blades fully 75 meters long in order to make the most efficient use of the North Sea winds.

Eek pointed to the single floating turbine that Statoil already has been operating off Hywind, Norway, since 2009. It is mounted on a weighted vertical steel cylinder, is anchored to the sea floor below and uses a navigation system designed by Statoil to remain in position.

Aditya Birla Nuvo to bid for solar power projects

The USD 4-billion company said in a filing to the BSE on Thursday that its board had approved participation in the bidding process for upcoming central, state and private sector solar power projects.

Aditya Birla Nuvo said that “With the renewed focus of the Indian government on clean energy and in line with the vision of the company to invest in promising sectors, the company is planning a foray in the solar power business. The board has authorized and approved the formation of special purpose vehicles (SPVs), or subsidiaries, by the company and will evaluate induction of investor(s) in the SPVs and subsidiaries, required.”

Aditya Birla Nuvo is a part of the Aditya Birla Group, a USD 40-billion Indian multinational company that operates in 36 countries across six continents.

The move comes at a time when the government is pursuing an ambitious target to generate 175,000 megawatts (MW) of green energy by 2022. Of the total 100,000 MW of solar power capacity planned, 20,000 MW will come from solar parks and 40,000 MW each from roof-top and distributed generation projects. The government plans to set up 25 such solar parks. India has around 300 days of sunshine per year.

George Osborne has infuriated green energy producers and campaigners with a £910m-a-year raid on the renewable energy sector by changing a climate change levy (CCL) at the same time as providing more fiscal help for North Sea oilfields.

RenewableUK, the lobby group, said the changes would cost green energy producers around £450m in the current financial year, and up to £1bn by 2020-2021.

The move hammered the share price of power generator Drax which is in the process of converting stations from burning coal to burning wood pellets. The company lost more than a quarter of its stock market value as it said the move would cost it £30m this year and £60m in 2016.

Caroline Lucas, the Green party MP, described the budget as a “serious blow for the fight against climate change”, while Greenpeace said it showed the chancellor is out of step with the times.

Osborne insisted the Conservative government would still continue to promote low carbon investment and would be pushing for a deal at United Nations talks in Paris later this year to limit global warming to 2C.

But his budget measures included removing the CCL exemption from renewable electricity schemes and promised streamlining other taxes.

“The government will review the business energy efficiency tax landscape and consider approaches to simplify and improve the effectiveness of the regime. A consultation will be launched in autumn 2015,” he said.

Phil Grant, of management consultants Baringa Partners, said the budget was bad news for investors in green power. “Britain is a world leader in green energy but the abolishment of climate change levies for renewables is another blow for an already fragile sector. Investors were perturbed by recent decisions … to reduce subsidies for new renewable plants and we’ve seen the share prices of companies exposed to renewables take a further hit this afternoon.”

Gordon Edge, RenewableUK’s director of policy, said that until now, Levy Exemption Certificates generated as a result of the CCL had provided vital financial support for renewable energy producers.

Renewable Energy Solutions Australia: Whisper-quiet wind power

Le Messurier and his team were determined to address concerns about noise and the environmental impact of wind turbines in order to ensure scalability – they created the Eco Whisper Turbine to do just that.

Les Messurier explains, “It’s a turbine that follows the wind so it’s always trying to face forward into the wind. Basically the wind turns the blades and it’s all directly connected to a generator. The power from the generator goes through a conversion process and we can either put that energy back into the site, into batteries or it goes back into the grid.” A revolutionary aspect of the Eco Whisper is that it’s virtually silent due to an outer ring placed around the tip of the blades. Le Messurier explains the concept by drawing a parallel to a common desk fan or room fan, “As the speed increases, the noise increases as there’s more air coming off the tip of the blades but that outer ring prevents that from happening.” The Eco Whisper Turbine also has 30 blades rather than the conventional two or three, which gives it the ability to start rotating and generating power with just a slight breeze. All of these factors combine to enable the Eco Whisper Turbine to generate up to 30 percent more power than conventional three-bladed designs.

There were concerns that wind turbines can cause negative health effects and have adverse environmental impacts but Le Messurier says, “The Eco Whisper Turbine really knocks a lot of that on the head. It’s virtually silent, and it’s had no impact on bird life to date and its design is especially unique. It has become something that people like and want to be associated with.”

No new plan for solar PV manufacturing expansion for China in 1H

PV Tech reported that a detailed preliminary analysis of global PV manufacturing expansion plans for the first half of 2015 indicates that little if any meaningful or ‘effective’ new plans were announced by Chinese producers for China.

Instead, Chinese crystalline silicon-based PV manufacturers announced more than 6.7 GW of planned capacity expansions in a number of overseas countries, including India, Malaysia, Thailand, South Korea, Brazil and the US.

According to PV Tech’s next updated quarterly report on global PV manufacturing capacity announcements, published in sister technical journal, Photovoltaics International, Chinese producers announced at least 19 GW of new capacity plans in 2014 for production in China.

However, the H1 of 2015 has seen several of the same tier-one companies that announced new production plans in China last year, such as Trina Solar, JinkoSolar and JA Solar, lead an exodus overseas.

This has been driven by US anti-dumping duties as well as plans to become major players in emerging markets such as India and Latin America.

The lack of new capacity expansions in China contrasts with over 12 GW of new announcements in 2015 for other regions across Asia, with Chinese producers accounting for just over half of the capacity announcement figures.

Massive solar plant planned for Oman

The largest producer of oil and gas in Oman is to build one the world’s largest solar plants.

Petroleum Development Oman (PDO) is partnering with GlassPoint Solar, to harness the sun’s rays to produce steam at a 1,021 megawatt solar thermal facility in South Oman called Miraah (meaning mirror in Arabic).

The new project will generate an average of 6,000 tons of solar steam daily for oil production, dwarfing all other solar EOR installations.

The steam will be used in thermal Enahnced Oil Recovery (EOR) to extract heavy and viscous oil at the Amal oilfield. Miraah will deliver the largest peak energy output of any solar plant in the world.

Once complete, Miraah will save 5.6 trillion British Thermal Units (BTUs) of natural gas each year, the amount of gas that could be used to provide residential electricity to 209,000 people in Oman.

PDO managing director Raoul Restucci, said: “The project will provide a significant portion of the steam demand at Amal and is an important part of PDO’s production plans. It will also displace diesel and higher carbon intensive power generation and oil burning in future thermal projects.”

Mr Restucci said EOR will account for around a third of PDO’s production by 2023.

Botswana seeks bids to build solar plants for mines

Botswana's government launched a bidding process on Tuesday to construct solar power plants near its huge Jwaneng diamond mine and for the nation's northwest, where copper assets are being developed.

"This invitation ... is a request for expression of interest to construct, operate, maintain and decommission at the end of its economic life, a scalable solar power plant," the government said in a notice in the State-owned Daily News.

The notice did not specify the capacity wanted but the minerals and energy ministry has previously stated the government wanted to place 100 MW solar power tenders which would be equally split between Jwaneng and the north-west mines.

Studies have identified Jwaneng as the most suitable place for a solar power plant in the country because of its abundant sunshine. The Jwaneng diamond mine is operated by Debswana, a joint venture between Anglo American unit De Beers and the Botswana government.

China 2nd largest hydropower station output exceed 80 TWh

Xiluodu hydropower station, China’s second largest and the world’s third largest hydropower station, witnessed its power output exceed 80 TWh by end-June since its full operation on July 1 2014, state media reported.

During the first half of the year, Xiluodu generated a total 19.5 TWh of power, official data showed.

The station, located in the Jinsha River, between southwestern Yunnan and Sichuan provinces, has 18 large generators and a total capacity of 13.86 GW per year.

By end-June, Xiangjiaba hydropower station – China’s third largest hydropower station, saw its total output exceed 60 TWh since its operation, with H1 output at 11.3 TWh, according to the report.

Xiangjiaba station, 157 km away from Xiluodu, located in the downstream Jinsha River, has an annual capacity of 6.4 GW.

Meanwhile, the country’s largest hydropower station – Three Gorges hydropower station, generated a total 35.7 TWh of electricity during the first half of the year, up 4.3% on year, according to a report from the China Three Gorges Corporation.

The station located in central province of Hubei and has an annual capacity of 22.4 GW.

EU politicians set to back carbon market 2019 reform start

The European Parliament on Wednesday is expected to back a 2019 start to reform of the world's largest emissions market in a step towards deeper change and higher carbon prices.

The aim is make the EU Emissions Trading System strong enough to spur investment in lower-carbon energy and comes ahead of U.N. talks in Paris at the end of the year over a deal to curb global warming.

Following a vote expected after 1 p.m. (1100 GMT) on Wednesday in a plenary session of the Parliament in Strasbourg, the reform will require a sign-off from member states to become EU law.

The planned reform involves setting up a Market Stability Reserve to store surplus carbon allowances that have piled up due to oversupply and economic slowdown.

The reserve also could release the pollution permits in the event of higher demand.

Jos Delbeke, director general of the European Commission's climate action department, said as many as 1.6 billion allowances could be removed from the market where a surplus of them has capped carbon prices that currently trade at around 7.50 euros per tonne.

Prices could rise to around 20 euros by 2020 with the help of the reform, analysts say.

Parliamentary sources said they expected the vote to be straightforward after a series of turbulent debates forged a compromise.

Agreement was complicated by Poland, whose economy relies heavily on coal, the most carbon-intensive of the fossil fuels. It led opposition to any action before 2021, the reform date initially proposed by the Commission.

Energy-intensive industry also raised concerns that reform before then would increase their costs and could drive investment into other areas of the world, a shift known as carbon leakage.

Dow Chemical, for instance, says energy-intensive industries must continue to receive 100 percent free allowances up to an EU benchmark to cover its exposure to the ETS.

To reward best practice, the Commission, the EU executive, uses a benchmarking system that gives free allowances to cover 100 percent of emissions costs for top-performing installations.

Jun Yang Solar Power Investments Ltd.

Jun Yang Solar Power Investments Limited is delighted to announce that, the Group is expected to record a significant rise in profit attributable to owners of the Company for the six months ended 30 June2015 as compared to that for the corresponding period in 2014 of approximately HK$121 million.

Such profit is principally attributable to the gain arising on change in fair value of held-for-trading investments of not less than HK$500 million.

About Jun Yang Solar Power Investments Limited (SEHK: 397)

Jun Yang Solar Power Investments Limited is mainly engaged in the business of assets management and investment, money lending, as well as investment in solar PV power generation.

France to launch floating offshore wind tender this month-trade group

The French government plans to launch a pioneering tender for several pilot floating offshore wind farms this month, a French wind industry trade group said on Tuesday.

Matthieu Monnier, head of offshore wind at France Energie Eolienne (FEE) said he expected two to three floating turbine projects with capacities of 15 to 60 megawatts (MW) each, for a total capacity of maximum 100 to 120 MW.

The tender will be a major step in the development of floating offshore, a nascent industry with huge potential, as fixed-foundation offshore turbines are limited to coastal waters with maximum depths of around 50 metres.

Portugal and Norway have pioneered the new technology in the past few years with a single floating turbine each, and Portugal plans to build a 25 MW floating wind demonstration farm. Japan also has floating offshore wind projects.

"In Europe, the French offshore tender would be the first of this size," Monnier told Reuters.

FEE is not sure what level of feed-in tariff subsidies the government will offer for floating offshore, but FEE president Frederic Lanoe said this would logically be more than the approximately 200 euros per MW for fixed-foundation offshore.

The projects will also received a combined 150 million euro investment subsidy.

Four areas on French shores have already been identified for offshore wind development, including Leucate, Brescou and Fos-sur-Mer on the Riviera, which has year-round strong winds and where the Mediterranean sea floor slopes steeply. A fourth area is around the island of Ile de Groix, off southern Brittany.

"We expect the tender in coming days," Lanoe said, adding that FEE had had discussion with the government about the issue.

The French energy and environment ministry was not immediately available for comment. The government has talked about a possible launch in June.

The tender is expected to test several offshore wind technologies, possibly including turbines with a vertical rotor axis, as opposed to the horizontal axis common in most machines.

U.S. government outlines solar power boost for the poor

The White House took steps this week to boost the installation of solar power and other renewable energy in federally subsidized housing and increase the number of jobs in the industry for poor people.

The U.S. administration has set a goal of installing 300 megawatts of solar and other renewable energy in affordable housing by 2020, tripling a goal President Barack Obama set in 2013 that has already been surpassed.

It is "really important for everyone to have access to solar and other renewable energy technologies both for the energy itself and the cost savings there, and also the employment opportunities," Brian Deese, a climate and energy adviser to Obama, told reporters in a teleconference on Monday.

Solar energy makes up less than 1 percent of the power generated in the United States, but the industry is growing rapidly. The 300 megawatts is enough for about 50,000 homes and is part of a wider White House goal to increase solar energy.

Asked whether power companies could try to recover costs to the grid of setting up renewable power and undercut any savings for low- to middle-income consumers, Deese said part of the effort is to arm people with more information to make good decisions.

The administration will offer technical assistance to affordable housing groups to install solar power and make it easier for homeowners to borrow up to $25,000 for efficiency and solar projects. In addition, AmeriCorps will help train 200 poor people to get jobs in the solar industry.

Esvagt is being sold by Danish shipping and oil group A.P. Moller-Maersk, which controls 75 percent of the shares, and a group of individual investors which owns the rest.

Esvagt has a fleet of 43 vessels and is a provider of offshore safety and support at sea primarily in and around the North Sea and the Barents Sea. It made a record profit of 252 million crowns in 2014 on turnover of 943 million crowns.

This year, it has put two specially built service operation vessels for offshore wind turbine farms into operation for Siemens Wind Power.

A.P. Moller-Maersk has offloaded a string of companies and stakes in subsidiaries in recent years to focus on container shipping, oil, port operations and drilling. It has booked more than $11 billion from divestments since 2009.

Where do you put a solar array in Japan? Why on a golf course!

In Japan, country club memberships famously went for millions of dollars in the late 1980s. Then, too many courses were built in 1990s and 2000s during a real estate boom. Now the nation faces the question of what to do with its abandoned golf courses.

Last week, Kyocera and its partners announced they had started construction on a 23-megawatt solar plant project located on an old golf course in the Kyoto prefecture. Scheduled to go operational in September 2017, it will generate a little over 26,000 megawatt hours per year, or enough electricity to power approximately 8,100 typical local households. The electricity will be sold to a local utility.

Google's interesting memo on renewables.

Google’s boldest energy move was an effort known asRE<C, which aimed to develop renewable energy sources that would generate electricity more cheaply than coal-fired power plants do. The company announced that Google would help promising technologies mature by investing in start-ups and conducting its own internal R&D. Its aspirational goal: to produce a gigawatt of renewable power more cheaply than a coal-fired plant could, and to achieve this in years, not decades.

Unfortunately, not every Google moon shot leaves Earth orbit. In 2011, the company decided that RE<C was not on track to meet its target and shut down the initiative. The two of us, who worked as engineers on the internal RE<C projects, were then forced to reexamine our assumptions.

That realization prompted us to reconsider the economics of energy. What’s needed, we concluded, are reliable zero-carbon energy sources so cheap that the operators of power plants and industrial facilities alike have an economic rationale for switching over soon—say, within the next 40 years. Let’s face it, businesses won’t make sacrifices and pay more for clean energy based on altruism alone. Instead, we need solutions that appeal to their profit motives. RE

What’s needed are zero-carbon energy sources so cheap that the operators of power plants and industrial facilities alike have an economic rationale for switching over within the next 40 years

Consider an average U.S. coal or natural gas plant that has been in service for decades; its cost of electricity generation is about 4 to 6 U.S. cents per kilowatt-hour. Now imagine what it would take for the utility company that owns that plant to decide to shutter it and build a replacement plant using a zero-carbon energy source. The owner would have to factor in the capital investment for construction and continued costs of operation and maintenance—and still make a profit while generating electricity for less than $0.04/kWh to $0.06/kWh.

That’s a tough target to meet. But that’s not the whole story. Although the electricity from a giant coal plant is physically indistinguishable from the electricity from a rooftop solar panel, the value of generated electricity varies. In the marketplace, utility companies pay different prices for electricity, depending on how easily it can be supplied to reliably meet local demand.

“Dispatchable” power, which can be ramped up and down quickly, fetches the highest market price. Distributed power, generated close to the electricity meter, can also be worth more, as it avoids the costs and losses associated with transmission and distribution. Residential customers in the contiguous United Statespay from $0.09/kWh to $0.20/kWh, a significant portion of which pays for transmission and distribution costs. And here we see an opportunity for change. A distributed, dispatchable power source could prompt a switchover if it could undercut those end-user prices, selling electricity for less than $0.09/kWh to $0.20/kWh in local marketplaces. At such prices, the zero-carbon system would simply be the thrifty choice.

How to Revolutionize R&D

A balanced energy R&D portfolio proposed by the authors would allocate the bulk of resources to proven technologies like hydro, wind, solar photovoltaics, and nuclear; devote 20 percent of funds to related technologies like thin-film solar PV and next-generation nuclear fission reactors; and keep a pot of money for “crazy” ideas like cheap fusion.Today In the United States, the vast bulk of funding for energy R&D goes to established technologies. Essentially no money is allocated to related and potentially disruptive technologies, and about 10 percent is spent on projects that don’t seek to produce economically competitive energy.

Unfortunately, most of today’s clean generation sources can’t provide power that is both distributed and dispatchable. Solar panels, for example, can be put on every rooftop but can’t provide power if the sun isn’t shining. Yet if we invented a distributed, dispatchable power technology, it could transform the energy marketplace and the roles played by utilities and their customers. Smaller players could generate not only electricity but also profit, buying and selling energy locally from one another at real-time prices. Small operators, with far less infrastructure than a utility company and far more derring-do, might experiment more freely and come up with valuable innovations more quickly.

Similarly, we need competitive energy sources to power industrial facilities, such as fertilizer plants and cement manufacturers. A cement company simply won’t try some new technology to heat its kilns unless it’s going to save money and boost profits. Across the board, we need solutions that don’t require subsidies or government regulations that penalize fossil fuel usage. Of course, anything that makes fossil fuels more expensive, whether it’s pollution limits or an outright tax on carbon emissions, helps competing energy technologies locally. But industry can simply move manufacturing (and emissions) somewhere else. So rather than depend on politicians’ high ideals to drive change, it’s a safer bet to rely on businesses’ self interest: in other words, the bottom line.

In the electricity sector, that bottom line comes down to the difference between the cost of generating electricity and its price. In the United States alone, we’re aiming to replace about 1 terawatt of generation infrastructure over the next 40 years. This won’t happen without a breakthrough energy technology that has a high profit margin. Subsidies may help at first, but only private sector involvement, with eager money-making investors, will lead to rapid adoption of a new technology. Each year’s profits must be sufficient to keep investors happy while also financing the next year’s capital investments. With exponential growth in deployment, businesses could be replacing 30 gigawatts of installed capacity annually by 2040.

Attached Files

French renewables power grid pilot shows limits of batteries in Europe

A major pilot project by Europe's largest power network operator to integrate power from rooftop solar panels into the grid has shown that battery storage of renewable energy is not yet economically viable in Europe.

The conclusion is a sobering one for proponents of sun and wind energy because as more of it comes on tap, better storage will be needed to keep the power produced when it is sunny and windy so it can be used at other times.

The 30 million euro "Nice Grid" pilot is one of the biggest in a European Union-backed "Grid4EU" scheme in which France's EDF, Italy's Enel, Spain's Iberdrola Czech Republic's CEZ, Sweden's Vattenfall and Germany's RWE are testing the power grids of tomorrow.

In the Mediterranean village of Carros on the outskirts of Nice, EDF's power grid unit ERDF has connected compact batteries to solar panels on rooftops and utility-size batteries to its local power distribution network.

The technology works perfectly but the pilot has shown it is still too expensive for wider rollout.

"The economic model of the batteries is not mature yet," Philippe Monloubou, chief executive of French grid operator ERDF utility told Reuters.

A quarter of Europe's power already comes from renewables. This may rise to 50 percent by 2030. But the intermittent nature of solar and wind power requires flexible grids, the ability to respond to the ups and downs of demand and, crucially, cheaper power storage.

French company Saft, which sold the batteries for the Nice pilot, has already installed 80 MW of battery storage around the world, mainly in remote areas in Canada, South America and Africa, or on islands where they compete with expensive diesel generators as a back-up source of power.

But in Europe, they come up against cheaper back-up power from gas-fired power plants and large, efficient grids.

Denison to buy uranium explorer Fission for about C$483m

Canadian uranium exploration and development company Denison Mines has agreed to buy rival Fission Uranium for about C$483-million, creating a new diversified Canadian uranium company with a portfolio of projects in the prolific Northern Saskatchewan mining region.

Denison advised on Monday that, under the terms of the deal, Fission shareholders would receive 1.26 Denison shares for each Fission share held plus C$0.0001 a share in cash. The offer implied a price of C$1.25 a Fission share, an 18% premium to the average volume-weighted price of Fission's shares over the past 30 days. With some 386.23-million shares outstanding, the offer translates into a price of about C$483-million for Fission.

Following the merger, the new entity would be named Denison Energy, have a market value of about C$900-million and be equally owned by Denison's and Fission's shareholders. "This merger will create the uranium industry's leading exploration and development company at a time when the sector is poised for growth," Fission chairperson and CEO Dev Randhawa said in a statement. He would become CEO of the combined company.

Headlining the asset portfolio of the combined company would be two world class uranium exploration and development projects, including Fission's Patterson Lake South project,and Denison's 60%-owned Wheeler River project, both located in the prolific Athabasca basin.

An emerging 15% supply gap could signal a prolonged upturn in the uranium price through to 2024, Canadian uranium major Cameco said recently. A decline in secondary sources of yellowcake was forcing the market to increasingly rely on primary suppliers, which, when coupled with unprecedented growth in the nuclear reactor industry, foretold improved market conditions over the medium and long term.

FAO said world cereal production would be "good" in 2015, forecasting overall output at 2.527 billion tonnes, fractionally above a forecast made in May, but still 1.1 percent below last year's record harvest.

Uralkali may upgrade 2015 output forecast

Russia’s Uralkali, the world’s largest potash producer, may upgrade its 2015 production forecast in August, the Vedomosti newspaper reported on Wednesday, citing two sources close to the company and its shareholders.

An accident at Uralkali’s Solikamsk-2 mine in November put part of the company’s capacity at risk.

Vedomosti’s sources did not say to what level the production forecast may be upgraded.

An unnamed source told Interfax news agency that Uralkali could sell between 11.4 million and 11.6 million tonnes of potash in 2015 as it aims to retain its market share after the Solikamsk-2 accident.

The company produced 12.1 million tonnes of potash in 2014 and 5.7 million tonnes in the first half of 2015, down 5 percent year on year.

In June, it increased its 2015 production forecast to between 10.4 million and 10.8 million tonnes from a previously expected 10.2 million.

Potash Corp open to raising K+S bid - Globe & Mail

Potash Corp of Saskatchewan Inc is confident that K+S AG shareholders would accept its $8.7 billion bid, but is open to raising it if its German rival could reveal more value not currently seen by the Canadian company, the Globe and Mail reported, citing a source close to the deal.

K+S last week rejected Potash Corp's bid, saying it was too low and that the Canadian suitor could be planning to dismantle the company, putting jobs at risk.

Potash Corp said on July 3 it was confident of addressing concerns raised by K+S and that it would seek to meet with K+S's management as soon as possible.

If K+S gave Potash Corp access to its books and the Canadian company found more value, it could raise the bid, the newspaper reported. (bit.ly/1KMMYiL)

"If we sit down and do due diligence and they can demonstrate some incremental value to us, we might have an extra euro for them. I wouldn't rule that out," the daily quoted the source as saying.

A K+S spokesman said that if Potash Corp would send them a new proposal they would be obligated to check it.

Winter Wheat suffers rain damage.

Precious Metals

Franco-Nevada sees future mine deals affected by Canada tax move

Franco-Nevada Corp., a Canadian company that invests in mining, said a government review of how a competitor pays tax on foreign earnings could in future make financing for some mine projects more expensive.

“It just changes the level of where these deals would get bid,” Franco-Nevada Chief Executive Officer David Harquail said Wednesday in a telephone interview.

He was referring to so-called streaming arrangements in which companies such as Franco-Nevada help fund a mining company in exchange for a percentage of future revenue from the operation in the form of discounted metals.

Streaming company Silver Wheaton Corp. said Tuesday the Canada Revenue Agency wants to reassess up to C$715 million ($561 million) in earnings resulting from its foreign subsidiaries. This could result in more than $200 million in back taxes and penalties for the years 2005-2010, Andrew Kaip, a Toronto-based analyst at Bank of Montreal, said in a note Tuesday.

Harquail said he believes Silver Wheaton will have to factor the tax risk into future streaming bids.

“I think that’s the way we’ll be bidding them as well,” he said.

Silver Wheaton said it saw different consequences as a result of the CRA letter.

“Our approach going forward is, we know this is going to be there but we’re not going to have to start factoring it,” Randy Smallwood said Wednesday by phone. “Tax does not decide if we win or lose. This is not a big enough issue that it has that much impact on our business model.”

Smallwood also said he believes the risk of the CRA’s proposal becoming fact is extremely low.

Harquail agreed that offshore streaming deals typically aren’t profitable solely because of tax structure, but said the proposed taxation changes could make deals “less profitable.”

In contrast to Silver Wheaton, which generates its revenue from streaming arrangements, Franco-Nevada has always preferred to own the property on which the mining takes place, Harquail said. It charges energy and mining companies a percentage of their production as a cost of doing business on the land in a royalty arrangement.

He said only seven of Franco-Nevada’s more than 385 financing assets are offshore streaming structures.

Silver Wheaton gets CRA proposal to reassess income tax

Silver streaming company Silver Wheaton Corp said it received a proposal from the Canada Revenue Agency (CRA) on Monday to reassess the company under various income tax rules.

The CRA is seeking to tax streaming income earned by the company's foreign units and said that Silver Wheaton's taxable income should be increased by about C$715 million (about $565 million) for the years 2005 to 2010.

"Generally a company is taxable in Canada on its income earned in Canada, while non-Canadian income earned by foreign subsidiaries is not subject to Canadian income tax," Chief Executive Randy Smallwood said in a statement.

Silver Wheaton, which makes upfront payments for the rights to buy future precious metal production, said it is not required to make any payment to the CRA at this time and that it intends to vigorously defend its tax filing positions.

Silver Wheaton said the CRA may issue notices of reassessment for one or more of the taxation years if it fails to reach a resolution at the proposal stage.

The company estimates it would be subject to federal and provincial tax of about $150 million for the relevant taxation years if Silver Wheaton would be assessed taxes on the foreign subsidiaries' income on the same basis as its Canadian income.

The CRA is also seeking to apply transfer pricing penalties of about C$72 million.

Taxation years after 2010 remain open to audit by the CRA, Silver Wheaton said.

A proposal letter is not a reassessment but sets out the possible adjustments to the taxpayer's income and the CRA's reasons for a proposed reassessment, the company said.

Texas wants its Gold back

AUSTIN, Texas (AP) — Forget Fort Knox or the Federal Reserve. Texas has decided to start keeping its gold holdings within in its own borders. But what makes sense politically in such a sovereignty-loving place is creating a logistical conundrum.

Texas is the only state that owns an actual stockpile of gold, according to public sector and financial industry experts — not just gold futures or investment positions, but approximately 5,600 gold bars worth around $650 million. The holdings, stored at a New York bank, for some harken back to century-old fears about the security of currency not backed by shiny bullion.

Rhodium slides to its lowest in more than a decade

Rhodium prices slid to their lowest level in more than a decade on Friday, suffering along with other platinum group metals from perceptions that the metal, widely used in the car industry, is in plentiful supply.

Rhodium RHOD-LON fell to $790 an ounce on Friday, its weakest since March 2004, extending three months of declines.

Among its sister metals, platinum also reached its lowest in more than six years this week, and palladium its weakest since the middle of 2013.

All three have been under heavy selling pressure after failing to capitalise on an unprecedented five-month strike among platinum miners in major producer South Africa last year, which indicated availability of substantial above-ground stocks of the metals.

"Clearly there's a good deal of metal in the market. South African producers are back at full production, and they're getting as much metal out of the door as possible to improve their cash position," Mitsubishi analyst Jonathan Butler said.

"(Rhodium) is a much more fundamental market than the other platinum group metals," he said. "I think where we are now reflects the lack of any significant bid in the market, or any significant industrial demand growth."

Rhodium prices have tended to be volatile over the last decade, rallying to a peak near $10,000 an ounce in 2008 before dropping sharply as the global financial crisis hit industrial metals demand.

Some 80 percent of global rhodium demand comes from the automotive sector, which uses the metal in catalytic converters. Most of the remainder is consumed by the chemical, electrical and glassmaking industries.

Base Metals

The copper giant is in the midst of executing a $25 billion investment plan aimed to expand its aging mines and search for new high-grade deposits.

Chile's Codelco, the world’s No.1 copper producer, is about to issue a bond deal of up to $2.5 billion over the coming weeks, although it is not clear yet whether it would be in U.S. dollars or Euros, mine minister Aurora Williams said Thursday.

Analysts think Codelco should have no trouble finding buyers in spite of weaker copper prices. "There are always headwinds, but (Codelco) is a strong credit," a banker told Diario Financiero.

The copper giant, in the midst of executing a $25 billion investment plan aimed to expand its aging mines and search for new high-grade deposits, was promised a $225 million cash injection from the government last week.

Though very few talk about it, Codelco is still suffering the consequences of a deal it signed with China's Minmetals back in 2006.

According to that contract, Codelco agreed to sell Minmetal 55,750 tonnes of copper a year — or about 3% of its annual sales — until 2021, at prices equivalent to what the red metal was trading for in 2005.

A new mine level being at Codelco’s El Teniente will extend the mine’s life by 50 years.

The miner is still trying to wriggle out of such deal, but chief executive Nelson Pizarro doesn’t think the solution is that simple. "I do not think a contract review would be easy (…) I also think it is unlikely to happen soon,” he was quoted as saying by El Pulso(in Spanish).

Copper was trading around $1.50 a pound at the time versus a market price of roughly $2.56 today, which means the tonnage iscurrently worth over $310 million versus $182 million 10 years ago.

The government has said it would evaluate during the second half of the year "how the investment plan has moved forward to define how much additional capital (will be given to Codelco) this year."

Rio's Kitimat smelter off to a good start

Mining major Rio Tinto said on Wednesday it was readying to ship the first aluminium from its Kitimat smelter, in Canada, following a $4.8-billion upgrade.

The modernisation of the aluminium smelter increased production capacity by 48%, to 420 000 t/y, and would result in the Kitimat smelter becoming one of the lowest cost smelters in the world.

The project was currently ramping up towards its full capacity. “The modernisation of Kitimat will fundamentally transform its performance, moving it from the fourth quartile to the first decile of the industry cost curve.

At full production, Kitimat will be one of the most efficient, greenest and lowest-cost smelters in the world,” said Rio Tinto aluminium CEO Alf Barrios. “Positioned in British Columbia on the west coast of Canada, Kitimat is well placed to serve rapidly growing demand for aluminium in the Asia-Pacific region and to serve the North American market.”

The modernised smelter is powered exclusively by Rio’s wholly owned hydro power facility and uses the company’s proprietary AP40 smelting technology, which would effectively halve the smelter’s overall emissions.

Alcoa expects China aluminium exports to slow but sees higher surplus this year

Alcoa Inc said Wednesday it expects Chinese exports of semi-finished aluminium to slow as prices drop and Beijing increases oversight, even as the U.S. company blamed the world's top producer and consumer for a ballooning global surplus.

Chief Executive Officer Klaus Kleinfeld said shipments of semis, including profiles and plates used to make window frames and beer cans, will likely drop as prices in the international market fall. He also said he believes Beijing is prepared to deal with the export surge, which is not in line with government policy.

Metals company Alcoa Inc reported a quarterly profit that missed expectations due to plunging primary aluminium prices on Wednesday, but revenues topped estimates on an ongoing drive to reduce reliance on the company's legacy commodity business.

The New York-based company has been investing in more advanced aerospace and automotive products while selling off some of its more traditional yet costly smelting facilities.

Three-month aluminium prices have slumped almost a quarter since September, weighed down by the global surplus, and have hovered close to or below the cost of production for a big portion of global capacity. Prices hit six-year lows of $1,630 per tonne on Wednesday, as concerns about China's stock market crash spread to commodities markets.

During a conference call with analysts, Alcoa raised its global forecast for the global aluminium surplus.

Supply is expected to outpace global demand by 760,000 tonnes this year, some 400,000 tonnes higher than Alcoa's previous forecast, William Oplinger, chief financial officer and executive vice president, said on a conference call to discuss the second-quarter results.

Alcoa said organic growth in its aerospace, automotive and alumina businesses, plus acquisitions offset declines caused by the divestment of lower-margin businesses as well as the decline in aluminium prices.

The company's recent acquisitions in high-value product lines included titanium supplier RTI International Metals Inc , which has around 80 percent its business focused in the aerospace and defence sectors. Alcoa said on Wednesday it hopes to complete the acquisition by the end of July.

Chief Executive Officer Klaus Kleinfeld told Reuters that the lower aluminum prices represented a "tough headwind," but the lower costs and less dependence on smelting facilities had mitigated the impact.

"On the commodity side it is what it is, we can't influence what prices are going to do," he said. "What we can influence is where we are on the cost curve and we will continue to work on it."

Alcoa reported a quarterly net profit of $140 million, up more than 1 percent from $138 million a year earlier. Profit per share slipped to 10 cents from 12 cents, reflecting an increase in the shares outstanding.

Excluding special items, the company reported earnings per share of 19 cents. Analysts had expected of 23 cents per share.

The special items included $143 million in charges related to restructuring Alcoa's business portfolio.

Revenue for the quarter was $5.9 billion, compared with $5.84 billion a year earlier. Analysts had expected revenue of $5.79 billion.

Only half of nickel smelters to be built in Indonesia this yr-industry

Nickel producers in Indonesia may only build half of the 12 new smelters anticipated this year and some may not commence production immediately due to low global prices, a senior industry official said.

Indonesia, which had been China's top nickel ore supplier, brought in export restrictions last year aimed at forcing mining firms to build smelting and processing facilities so the country could earn more from raw ores and concentrates.

I.D. Susantyo, chairman of the Indonesian Nickel Association, expected only five or six nickel smelters would be completed by the end of the year. That is half the number anticipated by the mining ministry in April.

Susantyo said not all of the smelters built this year would start production as global prices drop to six-year lows of around $10,700 a tonne, nearly half of their peak last year.

"With nickel prices dropping like this, even though they are completed, they may not be able to produce because the market price is lower than the cost of production," he said.

"Investors must think if their investments can make a return within two or three years. If this won't happen, they won't invest."

To produce one tonne of nickel in Indonesia, it costs producers around $14,000 a tonne with blast furnace technology and $13,000 a tonne using electric furnaces, he said.

U.S. Antimony Reports Record Sales

U.S. Antimony Reports Record Sales

United States Antimony Corporation reported record antimony sales for Q2 of 2015 of 637,825 pounds, which is up 92% from Q2 2014 sales of 332,106 pounds, and is an increase of 22% from Q1 2015 sales of 521,956 pounds.

The Company is in the final stages of completing 5 more small furnaces and one long furnace, which has the capacity of 20 small furnaces, for smelting Australian production. When the large furnace is completed, USAC will resume its own Mexican production from Wadley, Soyatal, and Guadalupe. These properties have been producing on a limited basis, and USAC has more than 400 tons of furnace feed in inventory.

At Los Juarez, there are more than 30,000 tons of mill feed in inventory. Permits are being applied for to increase silver and gold recovery at the Puerto Blanco mill and at Madero to complete the recovery of silver, gold, and antimony from flotation concentrates from the Puerto Blanco mill.

At the Bear River Zeolite operation in southern Idaho, the Company reports sales of 3,280 tons for Q2 2015, up 36% from the 2,415 tons sold for Q2 of 2014, and an increase of 8% over the Q1 2015’s sales of 3,032 tons. The Company has seen an increase in sales for animal feed, water filtration media, composting material, air filtration, and soil amendment.

Japanese aluminium industry looks to bridges to spur demand

Japan's aluminium industry will step up efforts to have the light metal used more in bridges and other infrastructure, taking advantage of new design standards to boost stagnant demand, the head of the metal's industry association said on Monday.

Aluminium costs more than traditional steel and concrete but using the lighter metal makes repair work easier, cheaper and faster as it requires less reinforcement in foundations, leading to lower maintenance cost, according to the association.

Japan's Society of Civil Engineers issued new design and production standards for aluminium structures in March, which should make it easier for the metal to be adopted as a construction material for bridges and floodgates, for example.

"We've had a major breakthrough in the infrastructure field as we've got de facto recognition by the civil engineers' society that aluminium can be used for structures," Akira Kaneko, the new chairman of the Japan Aluminium Association, told a small group of reporters.

"What we want now is to win at least one or two bridge projects this year and start building new demand," he said.

The industry is aiming to push up annual aluminium shipments including exports to 6.5 million tonnes by 2035 from 4 million now.

Japan has some 700,000 bridges across the country and more than 40 percent of them will be over 50 years old in 2023.

These bridges, built of steel and concrete, will need to be reinforced or rebuilt, and potentially that could increase annual aluminium demand by as much as 800,000 to 1 million tonnes, according to Motohiro Nabae, director at the association.

In the first instance, the industry is pushing the idea of using aluminium for separate pedestrian walkways to be added to existing bridges to increase safety, or for bridges for inspection and maintenance, as well as emergency bridges to be used at a time of natural disaster.

The industry body plans to hold talks with the transport ministry's regional offices, which set specifications for infrastructure, to spread understanding of the new standard.

Japan is Asia's top importer of aluminium and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange cash price set the benchmark for the region.

Japanese premiums for July-September shipments were mostly set at a six-year low of $100 as swelling Chinese exports piled pressure on an already swamped market. Stocks held at three major Japanese ports rose for the fourteenth month in May to hit a record high of 502,200 tonnes.

Metals investors look for miners to cut supplies to lift prices

Investors in industrial metals will keep a close watch on miners' results in coming weeks for possible announcements of production cutbacks that could bolster weak prices. "What will be very important over the next few weeks is whether we start to see some supply responses emerging during the corporate results period," said Nicholas Snowdon, metals analyst at Standard Chartered in London.

Iron ore, aluminium and zinc will get the most attention after a slide in prices that is pressuring the bottom line of some mining groups. Spot iron-ore shed more than half of its value in the 12 months to April, but has since rebounded by about 15% to $54.10 a tonne.

"Over the past six months Vale, BHP and Rio have independently suggested either cuts to existing production, holding back sales and/or the slower ramp up of growth volumes," Citi analyst Heath Jansen said in a note. "Stronger guidance from the companies on volumes could potentially drive lower volatility in the iron-ore price."

On April 30, Brazil's Vale, the world's top iron-ore producer, said it was considering reducing forecast iron-ore production by up to 30 million tonnes over the next two years.

Among base metals, the main focus will be on aluminium and zinc, analysts said. "Aluminium tops the list in terms of potential and much needed production cuts in the Western world. Also in the zinc market, we're seeing zinc mine production growing at the fastest pace in several years," Snowdon said. "Given the positioning in base metals, which have swung firmly to short side, if you do see some significant production cut announcements, that could be a trigger for some short covering," he added.

Top producer Rusal of Russia said in April it might idle 200 000 tonnes of capacity while US group Alcoa said the month before it was reviewing 500 000 tonnes of smelting capacity. On Tuesday, Alcoa said it would permanently close its Pocos de Caldas smelter in Brazil, which has capacity of just below 100 000 tonnes per year. The plant, however, has been idle since May 2014 so the move will not reduce current production levels.

Nickel is another candidate after prices on the London Metal Exchange slumped this week to a six-year low of $10,795 a tonne, down by nearly half from a peak last year.

"We are deep into the all-in cost curves for metals, with maybe the exception of copper," said Robin Bhar, head of metals research at Societe Generale in London. "But no one wants to be the first to cut because that hands an advantage to the other producer. Everybody's looking over their shoulders looking to see who will cut."

The reporting season of major mining and metals groups kicks off on July 8 when Aloca posts second quarter earnings.

Tiger Resources announces debt refinancing with Taurus

Tiger Resources Limited last week announced that it has agreed terms with Taurus Mining Finance Fund for the refinancing of Tiger's existing secured debt facilities and arrangement of a new facility to fund potential debottlenecking works at the Company's Kipoi Copper Project in the Democratic Republic of Congo.

China’s rate cuts to slow copper demand even further - Report

China’s recent moves to cut interest rates could “significantly reduce” its demand for copper, affecting global producers, a paper published by Peking University HSBC Business School warns. According to the article, there is strong evidence to conclude that copper stocks have been piled up at warehouses mainly “to facilitate a carry trade under capital controls.”

By “carry trade” they mean that speculators have been borrowing dollars to buy Chinese assets, and they often do so with leverage and through convoluted means, some involving use of copper or iron ore as collateral.

The bet is that the Yuan will strengthen, generating a near certain profit on the exchange rate. But this has gone badly wrong as the central bank intervenes to force down the exchange rate.

“Due to the importance of the Shanghai copper holdings for the global copper market, any unwinding or change in interest rate differentials will have significant impact on global commodity market pricing and trading,” warn the authors, Zhang Xiao, a fixed-income analyst with BNP Paribas, and Christopher Balding, associate professor at the Graduate business school.

Citing to data from the Shanghai Futures Exchange, which monitors Chinese stocks, they show that the amount of copper stored in the country jumped from 4% of global stock in 2009 to 38% last year.

According to the paper, for every 1 basis point increase in the onshore-offshore interest rate differential, copper carry trade positions increase by $1.5 million. The problem, it adds, is that during that very same period there were not changes in industrial production to justify such a large variation in inventory.

Copper’s fortunes depend not only on demand from China, though the nation is the world's largest consumer, accounting for 42% of global trade. The red metal is also highly needed on the build-out of the electricity grid, as well as wiring used in cars and consumer goods.

Flood of Chinese exports sinks aluminium prices

The Australian reported that the outlook for aluminium is looking severely pressured for the next few years as excess capacity in China shows no sign of easing, resulting in a more downbeat outlook for Australian-listed miners Rio Tinto, South32 and Alumina. Last week, Macquarie took the knife to its aluminium price forecasts to the end of the decade, while Macquarie and UBS cut their forecasts for alumina, the main ingredient in aluminium.

It said “Unlike most commodities, aluminium supply continues to grow at a rapid pace. With Chinese exports now likely to play a sustained and growing role in the global market in future years, the whole market has been radically altered.”

Macquarie slashed its 2016 to 2020 forecasts by 10 to 20 per cent and is not expecting prices (now at near six-year lows of $US1700 a tonne) to average more than $US1800 in any year until the end of the decade. For alumina, second-half ­prices have been cut from a range of between $US350 and $US380 a tonne to between $US325 and $US350 a tonne.

It said “Chinese (aluminium) production now sits at 31.3 million tonnes a year, up 16 per cent year-on-year, and with about 6 million tonnes of capacity growth still in the pipeline, it is fair to say the aluminium market remains and will continue to remain dominated by Chinese growth. This has cause significant structural changes in the aluminium industry, which has unwound the producer optimism seen through 2014.”

Supply of high quality copper concentrate shrank more than expected in the first half of this year due to output delays in top miner Chile, squeezing the pipeline for metal producers and likely supporting prices later in 2015, traders said.

Production from two of four mines in Chile that churn out clean, standard concentrate was stalled in the first half as the country was hit by floods, while the world's top mine, Escondida, has not tendered surplus concentrate for months, the traders and mining sources said.

Smelters blend clean concentrates with supply from mines that suffer from impurities such as arsenic, which have become more common as miners dig deeper into the earth's crust.

"The concentrate element is tightening up which will eventually flow through to a tighter refined market," said analyst Colin Hamilton at Macquarie in London

Benchmark LME copper has shed 8 percent this year as China demand slows, plumbing six-year lows in January. It traded at $5,800 a tonne on Friday.

President Yukio Uchida of JX Holdings told Reuters that production at Chile's Caserones mine, in which it holds a majority stake through its smelter, had been slow.

"Copper output at Caserones came at a low level for the January-June half due to the problem of slag disposal on site and floods in Chile," he said, without giving a specific figure.

But Uchida added that the firm was on track to expand output to full capacity in August or September, and that it was maintaining its forecast production of 90,000 tonnes of copper concentrate this year.

Elsewhere in Chile, the Sierra Gorda mine, owned jointly by Japan's second-largest copper producer, Sumitomo Metal Mining (SMM), and Polish producer KGHM Polska Miedz, began commercial-scale production six months behind schedule at the end of June.

Sumitomo said this week that it still planned to produce 123,000 tonnes of copper from the mine's concentrate this year, up from 11,000 tonnes in 2014.

Shipments from the world's biggest copper mine, Escondida, jumped in the first quarter, but fell 9 percent in April from a year earlier, Chilean customs data shows.

"They don't have any extra tonnes to tender ... I think they'll probably try to make their end of June number, to try and maintain their guidance, but I expect their production numbers for the second half to be poor," a trader said.

Steel, Iron Ore and Coal

Iron ore price rockets 9.5%

The price of iron ore surged, regaining much of yesterdays lost territory as authorities in top consumer China step in to calm markets rocked by steep declines on the country's equity markets.

The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin jumped $4.20 or 9.5% to $48.30 a tonne according to data provided by The SteelIndex, the biggest one day jump on record.

The resurgence comes just a day after a precipitous drop that saw the spot price reach an all-time low of $44.10 a tonne in a knee-jerk reaction to the chaos on Chinese equity markets.

After almost halving in 2014, the price of iron ore is down 30% this year and amid all the gloom it's easy to forget just how much today's 1.3 billion tonnes seaborne trade has changed in just the last decade.

The SteelIndex, a unit of Platts, first started tracking the spot price only in November 2009. Before the emergence of quarterly contract pricing and eventually a spot price, the seaborne trade was controlled by the Big 3 producers – Vale, Rio Tinto and BHP Billiton – which set prices during secretive negotiations with Japanese steelmakers and signed annual contracts.

Shanxi steel giant to pilot ecological design

Shanxi's steel giant, Taiyuan Iron and Steel (Group) Co became a pilot enterprise of industrial ecological design, on the decision of the Ministry of Industry and Information Technology, according to the province¡¯s State-owned assets supervision and administration commission on July 7.

During the pilot period, Taiyuan Iron and Steel Group will invest 800 million yuan ($128.88 million) for research and development of ecological products and green industrial chain. It will work for an entire circular industrial chain to get full use of solid waste and cyclic utlization of wastewater, and the ecological design system will be established in the enterprise.

Early in 2013, the Ministry of Industry and Information Technology, the National Development and Reform Commission and the Ministry of Environmental Protection jointly proposed guidance on ecological design, which declared that ecological design is significant to cut resource consumption and pollution during a product's life cycle.

An initiative to establish pilots for ecological design was proposed by the Ministry of Industry and Information Technology the following year. 41 enterprises from eight sectors, including steel, construction materials and electronic and electrical products, stood out as pilots. Taiyuan Iron and Steel Group is the only one located in Shanxi.

Shenhua a step closer to building new coal mine in Australia

China’s coal giant China Shenhua Energy Co., Ltd has won approval from the state government of New South Wales in Australia to build the Watermark coal mine, and is awaiting a green light from Canberra to start construction, the company said July 8.

The mine, to be located 25 kilometres south-east of the northern NSW town of Gunnedah, was invested 8.53 billion yuan ($1.39 billion). It is expected to produce 10 million tonnes of coal each year during its 24-year life.

China Shenhua bought the thermal and semi-soft coking coal project six years ago just before a peak in coal prices, which have since slumped to more than five-year lows.

Winning state approval for the Shenhua Watermark mine, which would be the company's first new large-scale mine, involved six years of assessments and included modifications in response to concerns raised by farmers. The state has in the past year rejected other coal projects for environmental reasons.

"Since Shenhua acquired the exploration license in 2008, we have worked tirelessly to demonstrate the project strikes the right balance to unlock the economic and social benefits of mining while ensuring the valuable agricultural production on the Liverpool Plains continues uninterrupted," project manager Paul Jackson said in a statement.

The federal approval process is expected to take a few months. The company will then begin work on detailed design and management plans.

With these elements in place, the mine may commence construction during 2015-2016, Jackson said.

Coal production would begin towards the end of 2017 at the earliest, a spokesman said.

Big Chinese steelmakers lose $2.7 bln in core business for Jan-May

Large Chinese steelmakers' losses in core business more than doubled during the first five months from a year earlier as tumbling steel prices plunged producers into red, a top official of the China Iron & Steel Association (CISA) said on Thursday.

CISA members, comprising of 101 big mills, posted a loss of 16.48 billion yuan ($2.65 billion) in steelmaking business for January-May, which was 10.36 billion yuan more from the same period of last year, according Zhang Guangning, CISA's chairman.

"It's obvious that China's apparent crude steel consumption has reached the peak, and the large growth of demand has became a history," Zhang said in a speech that was published on the CISA website.

Chinese steel prices are at their lowest in more than 20 years as the stuttering economy is hitting demand for a range of commodities including iron ore, steel and copper, threatening the survival of small steel mills.

The apparent consumption of crude steel in the world's top producer dropped 5.1 percent for the first five months from a year before, higher than 3.3 percent in 2014, while total output fell only 1.6 percent on year, the first decline in nearly 20 years.

"Some enterprises are short of capital and having difficulty in maintaining operations. A few would find it hard to survive and are facing the exit," Zhang added.

The bloated steel sector is also struggling with environmental compliance costs while the recent plunge in their share prices have also further tightened their cash flow.

The most traded rebar futures on the Shanghai Futures Exchange lost 28 percent so far this year, the same as the decline for the whole of 2014.

Attached Files

Iron ore prices in largest daily drop on record

According to Metal Bulletin’s iron ore index the spot price for 62% fines has dropped 10.1%, the biggest daily drop on record, to $44.59 a tonne. Here’s the chart:

The price collapse is being driven by two main factors:

Evidence that supply is continuing to increase out of the world’s biggest producer countries, Australia and Brazil, andConcern that Chinese demand is tanking as the economy slows.

Economists estimate that each $1 fall in the iron ore price results in around $300 million in lost tax revenue for Australia. So today’s fall alone of $5 in the price equates to roughly $1.5 billion being knocked off the budget bottom line.

The sharp and sudden decline will raise fresh questions about the viability of some iron ore miners.

Germany's long goodbye to coal dashes power price rise prospect

Germany's deferral of the death sentence for its coal sector still condemns power producers to the suffering of engrained falling prices for electricity, analysts say.

Seeking reductions in carbon dioxide emissions and battling overcapacity in Europe's biggest power market could have prompted Berlin to usher in an aggressive phase-out of old coal-to-power plants, supporting languishing prices.

Instead it decided to set up a coal-fired electricity reserve from 2017 rather than collecting levies from such plants to enforce a speedy closure. That is not seen as radical enough to boost power prices.

Costing 230 million euros ($253.69 million) each year, the reserve is not really intended to be activated, and implies the permanent shut-down of the plants after 2021.

"It makes less than 2 euros difference to the power price by 2020," said Stephen Woodhouse of consultancy Poyry. "We are not talking about anything that fundamentally alters the position of plants in the market."

The compromise decision of July 1 was aimed at deferring the loss of mining and generation jobs by a few years, and opted for a lignite (brown coal) reserve.

This involves 2.7 gigawatts (GW), less than 1.5 percent of nominal power capacity to be removed from supply between 2017 and 2020 in a scheme that will be worked out later this year between utilities and the government.

Since the decision, wholesale forward prices have not shown much change from pricing delivery in 2016 at around 31.80 euros a megawatt hour (MWh) and in 2021 at around 33.75 euros, data from the EEX bourse shows.

The mild contango, which is hedgers' term for a premium on a commodity at a future point, shows little expectation that overcapacity will disappear in a meaningful size while Germany continues on its course to consistently add renewable capacity.

The year ahead position is half its level seen in 2011, held down by oversupply, slack demand at home and in the euro zone's key economies that border on Germany, and the politically desired expansion of green energy.

The alternative option - which had been under discussion for over six months - would have involved a levy on coal-fired plants over a certain age, which could have driven many plants operated by RWE and Vattenfall out of the market.

Apart from costing jobs, this choice might also have removed too much of a safety net for times that renewable production is insufficient, as Germany simultaneously switches off unpopular nuclear plants by 2021.

The latest plan allows savings of between 11 and 12.5 million tonnes of CO2, with some hard coal and gas-fired plants due to replace the "missing lignite" on a 50/50 basis, Deutsche Bank and Bernstein analysts said in research notes.

But traders said the replacements would be more modern, running on less fuel and needing fewer CO2 emissions permits. "All things considered, it will not be bullish for coal," said one.

Miners paint rosy iron ore picture by skirting tough issues

Australia's major iron ore miners have had a torrid year so far, battling low prices, engaging in an ugly slanging match with each other and dealing with persistent questions about the wisdom of their expansion strategies.

The Minerals Council of Australia's report, entitled "Iron Ore: The Bigger Picture", points out the enormous benefits the industry has brought Australia and will continue to provide.

The major Australian iron ore miners, Rio Tinto and BHP Billiton, are members of the council and sit on the board of directors, but the country's third-biggest producer, Fortescue Metals Group, is absent from the list.

The report doesn't really make an effort to explain how the major miners got their forecasts on Chinese demand so wrong, and it glosses over whether they really expected the price to fall as low as it has.

What the report does do is present a positive outlook by highlighting the iron ore sector's contribution to the Australian economy.

Revenue from the industry totalled more than A$430 billion ($321 billion) in the decade from 2005 to 2014, and this will rise to over A$600 billion in the next 10 years, even assuming no further output growth and prices staying at low levels.

The report also points out that the bulk of this revenue accrues to suppliers and governments, with suppliers getting 53 percent in the 2010-2014 period, governments taking 24 percent, and the rest for investors.

The report's other main points include that iron ore is alone among Australia's major commodity exports in increasing market share in the past decade, and that this gain in market share was in the national interest as the extra volume produced was needed to offset the decline in price.

It's certainly a laudable achievement that Australia's iron ore producers managed to increase their share of the seaborne market from 34 percent in 2000 to 50 percent, while keeping costs at the lower end of the curve.

The argument is that anybody who thought the high prices that prevailed when iron ore reached a record just above $190 in early 2011 would persist was out of step with sensible analysis.

The report also makes the case that any form of intervention in the market to regulate supply would most likely end in failure and would be against the national interest.

What the report does achieve is it sets out a rational economic defence of what Rio and BHP did to lead Australia's iron ore output from 170 million tonnes in 2000 to around 660 million in 2014.

China sets new standards for coal conversion projects

China's energy regulator has released new draft guidelines for projects that convert coal to oil or gas, aiming to commit the sector to the strictest possible environmental standards, it said on Tuesday.

Beijing is looking for alternative sources of growth for its struggling coal sector, with more than 80 percent of domestic mining firms making losses as a result of slowing demand and chronic overcapacity.

Environmental groups have warned that coal-to-gas (CTG) and coal-to-liquid (CTL) projects will do little to cut carbon emissions or reduce pollution.

In a bid to allay concerns about the environmental risks of the process, projects will only be permitted in regions with sufficient water resources, the National Energy Administration said.

It said that any new project needed to be consistent with China's overall plans to control coal consumption, and would be encouraged to prioritise the use of low-quality coals with high sulphur and ash content to reduce their use elsewhere.

CTL plants would be permitted to use a maximum of 3.7 tonnes of coal for each tonne of oil produced, while CTG projects would have to use no more than 2.3 tonnes for every 1,000 cubic metres of gas produced, it said.

A decade ago, China encouraged miners and oil firms to establish CTL facilities in a bid to ease dependence on imported crude, and dozens of projects were planned.

But the government went cold on the technology in 2008 after global oil prices retreated, eroding the competitiveness of CTL. The technology also raised concerns about the use of scarce water resources in coal-rich regions like Ningxia and Inner Mongolia.

China's biggest coal mining firm, the Shenhua Group, launched a CTL project in Inner Mongolia in 2010. The firm aims to bring total capacity at the plant to 11 million tonnes a year by 2020.

China steel prices lowest in over 20 years, squeezing small mills

Chinese steel prices are at their lowest in more than 20 years as demand in the world's top producer wanes, industry data shows, and some analysts say the free-fall is not even close to an end, threatening the survival of small steelmakers.

A composite price index of eight steel products compiled by the China Iron & Steel Association (CISA) fell to 65.28 points last Friday. The index is based on 1994 reference prices, meaning that prices are now nearly 35 percent lower than they were 21 years ago.

While the association did not begin compiling regular data until 2001, current prices are already believed to be lower than 1999, when the industry was hit by the Asian financial crisis.

Last year, when the index fell to 95, CISA secretary general Liu Zhenjiang said it was already at its lowest ever.

The stuttering Chinese economy is hitting demand for a range of commodities including iron ore, steel and copper.

"The biggest problem is poor demand. The worst winter is yet to come and some small steel mills have already shut down, which could become permanent as cash flow will remain a big issue," said an official at a state-owned steel mill.

The price slide has meant local steel mills have failed to benefit from the rapid decline in iron ore, which remains about a third higher than two decades ago, and the sector is also struggling with surging environmental compliance costs.

China's appetite for steel is expected to take a further hit as construction eases over the summer, forcing mills to cut production. January-May output fell nearly 2 percent from a year before, with consumption dropping 5 percent, CISA data showed.

The most traded October rebar futures on the Shanghai Futures Exchange hit 1,948 yuan a tonne - the lowest since the contract's launch in 2009 after losing 27 percent this year.

China's recent stock market turmoil is now threatening to pull the entire commodity complex into the red.

The majority of Chinese steel mills are still reluctant to cut production in order to maintain cash flow and bank credit.

"This is the end game for mills. Whoever survives the current crisis could survive permanently, while those who can't will exit the market for good," said Cheng Xubao, an analyst at industry consultancy Custeel.com based in Beijing.

Iron ore price now in free fall

The price of iron ore gapped down again on Monday as declines in fixed investment and steel prices in top consumer China cloud the outlook for the steelmaking raw material.

The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin lost $2.10 or 3.9% to $52.00 a tonne according to data provided by The SteelIndex, the lowest since April 21.

Benchmark spot prices are now barely more than $5 above record lows hit the beginning of April and down 14% in one short week.

The rally in iron ore was fuelled by declining stockpiles in China where steelmakers consume more than 70% of the 1.3 billion tonne seaborne trade.

But after falling for 10 weeks in a row, port stocks climbed again last week to just below 82 million tonnes.

The HinduThe Hindu Business Line reported that to protect steel companies from the onslaught of cheap Chinese imports, Indian overnment plans to make it compulsory for all public sector undertakings to procure at least 35 per cent of their steel from local manufacturers.

Minister for Heavy Industries Mr Anant Geete, in an interview to BusinessLine, said his Ministry was considering making it compulsory for major government companies such as NTPC, ONGC, and BHEL to procure steel from domestic steel manufacturers. He said “These companies have a huge requirement of steel. Therefore, we will make it compulsory for PSUs to buy steel from local companies. It will provide some relief to the local industry.”

The Minister said “The domestic steel industry is in deep trouble due to heavy imports from China. Other countries have taken protective measures, such as increasing anti-dumping duty on steel. Only the Indian and Gulf markets are open to the Chinese steel makers. In this competitive environment, the Indian steel industry cannot stand up to this (Chinese) challenge. Therefore, I will soon be meeting Finance Minister Arun Jaitley along with a delegation from the steel and seamless pipes industry for increasing the anti-dumping duty and

The Minister also added that imported steel in huge quantities is dumped without any attention to quality. All PSUs are complaining about the quality of steel.

Debt-laden steel trader Stemcor, one of Britain's largest private companies, has agreed a deal with U.S. distressed investment fund Apollo and with its other creditors which "secures its future", it said on Monday.

According to an industry source, Apollo has an 'agreement in principal' to swap its debt for equity in Stemcor, giving it a majority stake. Stemcor's other creditors have also agreed a debt for equity swap and will run the firm alongside Apollo.

"Stemcor has agreed a deal with Apollo and with its lenders which secures the future of the core global business and provides us with a strong balance sheet with which to grow and develop the group," a Stemcor spokesman said.

It became Stemcor's largest lender after buying the company's debt in the secondary loan market.

Stemcor, controlled by the Oppenheimer family, was hard hit by the 2008 financial crisis and accumulated a large debt pile when it bought an iron ore asset in India.

The company was facing a December maturity on a $1.15 billion syndicated trade finance loan that it signed in March 2014 with lenders - including ABN AMRO Bank, HSBC, ING , Natixis, Societe Generale - as part of a restructuring. It also had a separate $1.3 billion debt, mostly accumulated in buying the India iron ore asset.

The new deal with Apollo and the other creditors is for Stemcor's core steel trading and distribution business, not for the Indian asset, which has been spun off into a separate entity, according to the industry source.

Stemcor has been trying to sell its India business since 2013, but the sale has been hampered by changes in Indian legislation, including a Supreme Court order last year to close nearly half of the mines in Odisha state, including Stemcor's.

Mongolia to sell stake in its giant Tavan Tolgoi coal mine

Mongolia to sell stake in its giant Tavan Tolgoi coal mine

Mongolia is considering the sale of stakes in 10 state-owned companies over this year and next, including part of its $4 billion Tavan Tolgoi (TT) mine —its biggest coal operation—, as the country tries to shore up investor support for its flagging economy.

The government will mainly focus on divesting holdings in power plants and other businesses,Bloomberg reports.

Tavan Tolgoi is home to the world’s largest high-quality coking coal deposit used in steelmaking, with reserves estimated in 7.4 billion tonnes.

Located in the South Gobi desert, Tavan Tolgoi is home to the world’s largest high-quality coking coal deposit used in steelmaking, with reserves estimated in 7.4 billion tonnes.However management of the operation has been characterized by bureaucratic bungling.

The latest impasse came in April, when the parliament cancelled a deal with a consortium of foreign firms, including China's Shenhua Energy and Japan's Sumitomo Corp., interested in developing Tavan Tolgoi.

The lawmakers continue to raise objections to financial and legal aspects of the TT investor agreement, hinting at the possibility that the mine could suffer a similar fate to that of Rio Tinto’s Oyu Tolgoi. An expansion at the global miner’s $5 billion copper operation was only unblocked in May, after two years of wrangling.

In 2011 Mongolia's National Security Council rejected a deal struck with US giant Peabody Energy, China's Shenhua and a Russian-Mongolian consortium mid-September, just two months after they were announced as winners. At the time losing bidders from Brazil, India and South Korea raised serious concerns and Japan went so far as to call the bidding process “extremely regrettable.”

Shandong 90pct coal firms suffer losses

Nearly 90% of the coal firms in eastern China’s coal-rich Shandong province suffered losses during the first quarter of the year, with total losses at 887 million yuan ($144.9 million), local media reported.

Some 90% of the coal firms even started to pay employees by borrowing from banks; some small miners have declared bankruptcy, according to the report.

Shandong is facing severe coal resource depletion, with only 4.1 billion tonnes of available reserves. Among all the 185 mines in this province, 21 mines have a mining life of no more than 5 years and 61 mines less than 10 years of mining life.

Impacted by low price and premium quality of imported coal, the market share of Shandong’s coal producers have been declining in the recent year, reaching 33% in 2014 from 63% of ten year ago.

Qiao Naichen, president of the provincial Coal Industry Bureau has vowed in a recently meeting to clean up all coal-related unreasonable taxes and fees, in an effort to save its ailing coal sector.

In 2014, Yanzhou Coal Mining Co., a leading coal producer based in eastern Shandong, posted total taxes and dues expenses of 6.73 billion yuan, accounting for 41.09% of its total income.

In 2014, taxes and dues expenses from coal enterprises of Shandong accounted for more than 30% of their incomes and more than 45% of their total production cost, higher than a 35% share of the national level.

Shandong also planned to shut 35 small outdated mines with annual capacity below 300,000 tonnes in 2015, said the provincial government on May 19.

Fortescue offers first spot iron ore cargo: customers

Australian miner Fortescue Metals Group Friday offered for the first time an iron ore cargo on a spot basis, customers of the producer told Platts.

FMG usually sells its iron ore material through long-term contracts to its customers.

Any spot reselling is then done by the customers themselves, with FMG not having made any spot appearance until now.

"FMG already told us [Thursday] that they would offer [57.9% Fe] Kings fines on COREX Friday," a Shanghai-based trader said. "This is the first offer on a spot platform for them."

FMG did not respond to emailed requests for comment on the matter Friday.

The miner is offering Kings fines on the COREX platform at $2/dmt CFR Qingdao over the July average of the Platts 62% Fe IODEX assessments.

Several customer sources also confirmed the formula used for FMG offers.

The Baltic Exchange C5 Index rate is subtracted from the average of the IODEX assessments, an iron content adjustment is applied, following which the term discount of 4% for Kings fines is calculated for the cargo.

Thereafter, the freight is added back on, and the $2/dmt premium is placed on top of that value.

The trader added that, as early as in the first quarter of this year, FMG had already talked about plans to offer cargoes on spot trading platforms.

"They should be continuing to push out more cargoes onto the spot market from now on and we can expect to see them on the trading platforms."

Iron ore price fall a sign China's economic might waning

Iron ore prices dropped to the lowest in more than two months, sending shivers through the mining industry and heightening worries that Chinese economic activity is slowing just as ore piles up at its ports.

China uses more than a billion tonnes of iron ore a year to make steel - 14 times the consumption of the United States - but Beijing's efforts to shift the economy to consumer-led growth means steel consumption is peaking faster than expected.

"It's clear China can no longer consume all the iron ore that's out there, so something's got to give," said James Wilson, a sector analyst for Morgans Financial in Perth

Iron ore delivered to China stood at $55.80 a tonne, its weakest since late April, Reuters data showed. The most traded iron ore futures on the Dalian Commodity Exchange followed, slumping to the lowest since April 24 of 402.5 yuan ($64.86) a tonne.

Shipments from Australia's Port Hedland to Chinese ports rose 3 percent to 32.61 million tonnes in June from a month earlier, the latest port data showed. The June increase at the world's biggest iron ore terminal helped sweep iron ore exports for the fiscal year to June 30 to 21 percent higher to a record 439.6 million tonnes. Of that, 373.24 million tonnes were destined for China, according to the Pilbara Ports Authority.

Steel consumption in China from January to May tumbled an alarming 8 percent from a year before, according Zhao Chaoyue, an analyst with Merchant Futures in Guangzhou. "China's real steel consumption will fall further over the rest of this year," he said.

China key steel mills daily output up 1.2pct in mid-Jun

Daily crude steel output of key Chinese steel producers increased 1.18% from ten days ago to 1.76 million tonnes over June 10-20, showed data from the China Iron and Steel Association (CISA).

The association didn’t publish the estimate of China’s total daily output during the same period.

As of June 20, total stocks in key steel mills stood at 17.46 million tonnes, up 7.04% from ten days ago and up 5.37% from the month before.

During June 10-20, prices of the six major steel products all posted declines from the previous ten days, with rebar prices averaging 2,211.7 yuan/t, down 2.7% from ten days ago, showed data from the Ministry of Commerce.

Iran steelmakers request import duty hikes, cite cheap China steel

Iranian steelmakers have asked the government to raise import duties for certain steels by up to 40 percent as protectionism in the global steel sector gathers pace amid a flood of cheap sales mostly from top producer China.

"We have asked the government to raise import duties by up to 40 percent on flat steel products. For long products we plan to ask for duties of up to 30 percent," said Bahador Ahramian, a board member of the Iran Steel Producers Association (ISPA).

Earlier this year, Iran raised import duties on certain steel imports to between 10 and 20 percent in response to a request from ISPA and in line with the government's bid to diversify the economy away from oil.

Tehran is anxious to protect its steel and iron ore sector, which it sees as a strategic because it supplies dozens of related industries, including construction and oil, and indirectly employs millions of people.

"We do not have proper anti-dumping duties in place in Iran and we hope these measures will function like anti-dumping duties in practice. Most of the steel imports into Iran are coming from China," added Ahramian.

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